Energetica India - June 2020

POWER SECTOR Is India turning the corner on procurement with safety in mind? The L1 tender framework rewards contracts to the lowest bidder. On the surface it’s a functional way to ensure competitive pricing if the selection of that product has also been based on analysis of the whole supply chain / project / life cycle. However, it’s clear that many buyers, both private and public, feel increasingly hampered by it when these full life costs are not considered as part of the process. The state of India’s electricity infrastruc- ture, both existing and planned, is a challenging one. With a swiftly growing population, often tightly packed into neighbouring suburbs, coupled with on- going electrification to improve quality of life, the pressure on India’s grid mounts daily. IEEFA expect India’s grid to require US$60-80bn over the next five years to service increasing demand and up - grades. Around the same investment again will be pumped into renewable generation to add 80GW of solar and wind by 2022. Transport Minister, Nitin Gadkari, has set out ambitious targets for the electrifica - tion of India’s transport with proposals outlining that all two-wheelers be electric by 2025 – over 21 million were sold in the 2018/19 financial year alone. And the minister has set out similar plans for 30% of cars to be electric too. Electrification, decarbonization and the necessary grid upgrades to support these initiatives, present an opportunity for India to create a lasting legacy that could service the country for well over 50 years, if the right choices are made. And that is the crux of the issue. Does the existing framework ensure quality and safety? The L1 tender framework rewards con - tracts to the lowest bidder. On the sur- face it’s a functional way to ensure com - petitive pricing if the selection of that product has also been based on analysis of the whole supply chain / project / life cycle. However, it’s clear that many buy - ers, both private and public, feel increas - ingly hampered by it when these full life costs are not considered as part of the process. Talking to industry colleagues at Elecrama, it’s clear to us that safe - ty is increasingly front of mind. But the framework, which often requires the low - est bidder’s offer to be accepted without well-rounded consideration, does not al- ways support these emerging ambitions. Increasingly, buyers want the option to weigh up a product’s quality, safety and total cost of ownership, which includes maintenance implications. Some sectors are already beginning to make the move towards a safer way of procurement. In July 2019, Bengaluru’s Minto Ophthalmic Hospital hit the head - lines when 24 patients suffered adverse reactions due to a drug procured under the L1 framework. The incident prompt - ed a call for an exemption from the rule to allow the hospital to procure better quality, safer drugs with an existing rep - utation in the market. A positive outcome and one that could help other industries avoid their own near-death experiences. India’s energy sector is one of them. The sector uses the same framework and subsequently faces similar issues. But to add a further layer of complexity, it also has the long history of its infrastructure to contend with. While India’s electricity industry has come a long way in improving standards and practices to close the gap between itself and its international peers, much of India’s electricity infrastructure still does not meet basic safety standards for man - ufacturing and maintenance. This is not helped by the lack of consideration for quality versus cost in the L1 framework, where the possibility of poorer quality materials slipping through would put the grid at risk. Steve Jones Sales Director, MIDEL energetica INDIA- June_2020 51