GAIL under pressure to re-tender pipeline project

Vol 12, PW 23 (23 Apr 09) People & Policy

GAIL faces a clamour from politicians of all stripes to re-tender an ongoing pipeline project on the grounds that the global economic slowdown has resulted in a sharp 25% drop in steel prices since bids were submitted in January and opened in late March.

Some observers contend that such noises from politicians should be ignored as the usual lobbying efforts by companies that fell short but want to get a second chance. Certainly the lowest bidders, MAN Industries and Jindal Saw, could argue that the unsuccessful bidders are using a ruse by claiming GAIL is wasting taxpayer’s money.

MAN and Jindal Saw were among five qualified bidders, which also included Welspun Gujarat, Punj Lloyd and Ratnamani. But some industry sources say GAIL should have had the foresight to cancel the tender before opening bids in the face of falling global steel prices.

â€‌Instead of opening the price bids GAIL should have called for reduced prices, citing falling steel prices,â€‌ says a source. â€‌The difference between Jindal, the lowest bidder in the first category, and MAN – the lowest bidder in the other three categories – is too wide and not justified.

â€‌ GAIL, we are told, could save as much as $16m by re-tendering the project, which proposes a pipeline parallel to the existing Dahej to Vijaipur gas transmission trunk pipeline and is referred to as DVPL-2. A strong argument in favour of the re-tender, we are told, is that while Jindal has quoted $783/tonne for a total 168,890 tonnes of steel in the category that it won, MAN’s price of around $1030/tonne for 155,478 tonnes of steel in the three categories that it won, does not hold up to scrutiny.

â€‌Mere differences in thickness of the pipe do not justify such a vast difference in price,â€‌ we are told. â€‌The bids were evaluated purely on price/tonne of steel.


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