BHEL to build Korba, not CMEC

The Chhattisgarh government has cancelled the contract awarded to China National Machinery and Equipment Import and Export Company (CMEC) to set up 600MW thermal power plant in Korba district.

Bharat Heavy Electricals Ltd (BHEL) lost the bid to the Chinese company which won the contract by quoting the lowest rate of Rs 3.61 crore.

BHEL would now build the project.

"The decision to cancel the Letter of Intent (LoI) given to the CMEC was taken after a high level meeting," Chairman of Chhattisgarh State Electricity Board (CSEB) Rajib Ranjan told Business Standard.

The state constituted a committee to initiate further action against the Chinese firm for delaying construction of the project by two years, Ranjan said.

CMEC could be blacklisted for the delay and refusal to take up the project.

CMEC got the LoI in August 2007 but did not start work and asked the board to raise the project cost, citing rise in prices of steel and other inputs as a reason.

CSEB held several rounds of negotiations with CMEC but failed to end the standoff.

CSEB refused to consider CMEC's proposal and invoked the bank guarantee of Rs 35 crore deposited as bid money.

Instead of calling a fresh tender, the government decided to award the second lowest bidder of the project, BHEL.

CSEB would now negotiate with BHEL to finalise the deal, Ranjan said.

BHEL has earlier bagged the procurement and construction (EPC) contract for setting up two units of 250MW each at Korba (East) thermal power project (TPP).

While the first unit had been commissioned, the second was scheduled to start production by next month.