Contracting firm move on BF-V puts Rourkela Steel Plant in a spot

ROURKELA: Rourkela Steel Plant (RSP) of SAIL is caught in a dilemma. Global engineering and contracting firm Danieli Corus, involved in commissioning of Blast Furnace (BF)-V, has legally restricted it from using its drawings to procure spares for the Blast Furnace (BF)-V from other suppliers. The RSP has to pay more for buying from Danieli.

Moreover, the RSP management is worried over Danieli Corus moving the ICC International Court of Arbitration to seek damage of more than `300 crore.

A consortium of Danieli Corus and Tata Projects Ltd (TPL) had set up the BF-V and it was based entirely on the technology and knowhow of Danieli Corus. As per the Summary Price Schedule, the total cost of BF-V project was about `2,050 crore.  Danieli Corus had carried out contract works worth nearly `460 crore in design and engineering, supply of plant and equipment, supply of commissioning spares and  foreign supervision charges in India.

Incidentally, the BF-V, with daily average hot metal production capacity of nearly 8,000 tonnes, was instrumental in enhancing RSP capacity to 4.5 Million Tonnes Per Annum (MTPA) from 2  MTPA and its trial run was done in August 2013.

The RSP sources said on getting commissioned, the BF-V started to witness frequent breakdowns and the RSP needed critical spares to restore it. The RSP resorted to the practice of floating tenders with the design and drawings of Danieli Corus and secured costly spares at competitive prices only to invite legal action from Danieli Corus.

An electronic mail communication of A Bhalla, AGM (Law), SAIL, dated December 1, 2017 sent to the Head of the Law wing of RSP is in possession of this paper. Referring to the injunction order of November 24, 2017 of the Delhi High Court, he wrote the fallout of this adverse order is two-fold. Firstly, this will have an impact on the arbitration matter to be taken up before the ICC. “Secondly, any tender for manufacturing spares for which Danieli Corus has given us the designs containing the express disclaimer referred above will be closely watched by them and there is probability to go for the contempt of court in the event of breach of the order.”

Official documents of BF department accessed by this paper show the concern of the RSP which has not yet received ‘As Built’ drawings of BF-V. The documents said almost all drawings of Danieli Corus have such disclaimer and injunction order would adversely affect RSP’s procurement actions.

Sources in the RSP blamed the management for the fiasco and pointed out there is no end to such disclaimer. They pointed out the management erred in not taking the detailed engineering design of the BF-V while the terms of payment clearly mentioned it.