NTPC Annoying SME Vendors

SMEStreet Desk
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By Faiz Askari, Editor SMEStreet

Programs like 'Make in India' have given a great hype towards Indian economy and Indian industrial output. But the reverse side of this hype is not so glossy. While India is shining bright at a global level and thousands of global companies are looking forward to enter India, and they are getting warmly welcomed by Indian policy makers. But among all this, Indian small business owner are yet again feeling isolated. This time, entrepreneurs from the SME segment have expressed their distress against NTPC.

However, government is working on business sensitive issues like delayed payments, factoring act, revival of sick units and there are SME friendly policies such as New Procurement policy, Defense Offset policy but the actual impact on the SME segment is yet to be witnessed.

Coming back to the distress issue of SMEs with NTPC. While NTPC and Russian suppliers of Main Plant Equipment are fighting for Barh-1 project, caught in the cross-fire are scores of other smaller equipment manufacturers – most of them Indian, who find themselves saddled with financial burden for no fault of theirs.

Both NTPC and Russian suppliers enjoy the sovereign backing, but these smaller suppliers have nowhere to go.

The then Prime Minister, Atal Bihari Vajpayee, had laid the foundation stone of the main plant of stage-1 of NTPC Barh on March 6, 1999. The project, which has missed several deadlines, is now expected to be commissioned in 2017.

This situation is not restricted to Barh-1 project. Several projects of NTPC are running behind schedule. Work on 750MW Bongaigaon project in Kokrajhar, Assam was started in 2006, yet even after 9 years, the end is not in sight. Similarly, in Pakri-Barwadih coal mining project awarded to it in 2014, NTPC had earlier planned to start mining from the block, by end-2007, but is still to see the light of the day.

Generally, the smaller suppliers would have finished the supply of equipment, but erection and commissioning would be pending due to lack of fronts by NTPC. For example, in Barh-1, the fronts could not be provided because the Russians did not supply the main plant equipment. However, NTPC would keep on asking the smaller suppliers for extension of warranty period, insurance and bank guarantees and would also hold a certain proportion of supply payment, which was linked to erection/commissioning.

“In one project, frustrated by delays of over 4 years in contract closure and financial stress this caused, when I asked for termination of contract,  NTPC responded by writing to bank for encashment of bank guarantee” rues an SME entrepreneur.

Such heavy-handedness and abuse of power by NTPC, tardy judicial system, coupled with insufficient legal help available to SMEs (when compared to government giants like NTPC) is a big threat to Indian engineering sector – a key constituent of Prime Minister’s Make in India vision.

The suffering SME manufacturers have approached Federation of Indian Micro and Small & Medium Enterprises (FISME) to take up the issue with concerned authorities.

Defense Offset Policy SME NTPC. New Procurement policy