MC Explains: How did IOC's inaugural green hydrogen project reach Delhi HC's corridor?

The plan to construct the country's largest green hydrogen plant has entered a legal mess amid allegations that the nation's largest fuel retailer, Indian Oil Corporation Ltd (IOCL), made "tailored" tender norms favouring a joint venture that included the state-run oil marketing company.

On February 21, IOCL cancelled tenders for its inaugural green hydrogen plant to be set up in Panipat, Haryana, according to a corrigendum seen by Moneycontrol. The tenders were cancelled after the potential bidders moved court alleging a conflict of interest. The Independent Green Hydrogen Producers Association, which comprises six renewable energy firms, filed a petition in the Delhi High Court in November against the oil ministry, IOCL, and JV company GH4 India.

Moneycontrol explains what went wrong, and what's the future of this project?

What is the project in question, and why is it important?

The green hydrogen plant with a 10 kilo tonnes per annum (KTA) capacity to be built at IOCL's Panipat facility in Haryana is poised to be the largest in the nation. The selected bidder is expected to provide gaseous green hydrogen to IOCL at the designated delivery point. The move comes as IOCL moves towards the green hydrogen space, which is still at a nascent stage and is expected to pick up pace in the next four to five years.

India’s green hydrogen production capacity is likely to reach at least 5 MMT per annum, with an associated renewable energy capacity addition of about 125 GW by 2030, according to the targets set by the Ministry of New and Renewable Energy.

Earlier this month, Prime Minister Narendra Modi vowed that the country would be the hub for green hydrogen production and export.

When were the tenders floated, and what happened?

Amid India's ambitious plans to power up the country's green hydrogen ecosystem to help meet energy security needs, IOCL floated global tenders for a Green Hydrogen Generation Unit (GHGU) of 10 KTA capacity on a build-own-operate-transfer basis on August 28, 2023.

According to court documents seen by Moneycontrol, the bidders had raised an objection with IOCL on two clauses mentioned in the tender document, which allegedly granted an unfair advantage to the JV. However, the petitioners allege that IOCL did not amend the clauses but instead extended the bid opening date twice. This led the group of renewable energy firms to file a petition with the Delhi High Court on November 6, 2023. The next hearing on the matter is scheduled for March 28.

Why are the petitioners calling the tender unfair?

The clauses 19 and 20 of the tender were deemed to be discriminatory, according to the petitioners. Clause 19 refers to the right of first refusal or purchase preference for GH4 India. It states that the IOCL JV will be allowed to match the Lowest Levelised cost of Hydrogen (LLCOH) of the lowest bidder through the reverse auction process if it does not participate in the reverse auction or does not become the lowest bidder, while Clause 20 permits IOCL to not accept the lowest bid.

Typically, in a reverse auction, the bidders compete to be selected as sellers by the buyer by quoting low prices and underbidding each other.

What is the JV company saying? 

IOCL incorporated the JV company GH4 India along with L&T Ltd and ReNew Power on August 25, 2023.

In an affidavit filed by GH4 India on December 13, it was argued that the tender condition of the Right of First Refusal (ROFR) is well recognised under Indian law and is an accepted process for public procurement. The company further added that the grant of ROFR would enable IOCL "to maintain efficiency and provide financially optimal control over the work to be carried out."

What would happen to the project?

As of February, IOCL cancelled the tender after only one bidder, GH4 India, expressed interest in developing the hydrogen plant. The delivery of hydrogen gas was expected within 30 months of the letter of award being given to the winner of the bid. However, with the legal battle, there are now chances for re-tendering, thereby further pushing the commissioning of the project.