Will Neyveli ask EIL to execute LEPC-1 job?
State-owned brown coal or lignite producer Neyveli Lignite (NLC) is expected to ask consultant Engineers India (EIL) to execute its LEPC-1 lignite-to-gas project, offered in a tender that was later scrapped.
On April 1 (2024), Tamil Nadu-based NLC announced it had cancelled LEPC-1 without giving a reason. An industry source is not surprised because when NLC opened the sole valid bidder L&T's price bid on January 5 (2024), the quote was about Rs3000cr ($375m).
Additional coal secretary M Nagaraju told us at the time that L&T's price bid was "236% higher" than the project estimate. Nagaraju added the government cannot justify such a "high variation."
He also hinted that LEPC-1 would be retendered if negotiations with L&T stalled. Some say NLC will likely ask EIL to execute LEPC-1 as an EPCM contractor.
"But for this, EIL must prepare a fresh DFR (Detailed Feasibility Report) with revised CAPEX," we hear. "This DFR will be for the entire project (LEPC-1 and LEPC-2) and will take at least three months to prepare."
State-owned Projects & Development India (PDIL) prepared the current DFR for NLC's lignite-to-methanol project. "This DFR must have been prepared more than two years ago, considering that the LEPC-1 and LEPC-2 tenders have been under bidding for 18 months," adds a source.
"Clearly, the CAPEX estimates are outdated now." For instance, NLC's estimate for LEPC-2 (gas-to-methanol) is believed to be Rs1300cr ($162m).
But a more realistic estimate at current prices is about Rs2000cr ($250m). Even if NLC asks EIL to execute LEPC-1, some say L&T will be the sole Indian bidder for the gasifiers and related coal gasification equipment under licence from Shell and other global providers.
China's Wuhuan Engineering is the only company that can compete with L&T. But a July 23 (2020) order from the finance ministry's Department of Expenditure (DoE) forces Chinese companies to undergo rigorous defence and security screening.
Unless Chinese competitors can bid, L&T is unlikely to lower its price for equipment.