IEEMA Journal April 2020

the leading electrical & electronics monthly

VOLUME 11 z ISSUE NO. 8 z APRIL 2020 z PGS. (!

ISSN 0970-2946 z Rs. 100/-

L1 Bidding Mechanism Industry Demands Change!

COVID-19 Stay Home Stay Safe

April 2020

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From the President’s Desk

Dear Friends, The deadly Coronavirus Pandemic is taking thousands of lives World over and has become a global emergency. This is an unprecedented & challenging time for all us & indeed demands total discipline in its not spreading further. We fully support the nationwide lockdown announced by the Government, stringent measures like this are indeed necessary to ensure containment of COVID-19.

Like World over, the coronavirus outbreak certainly puts more pressure on the Indian economy as well. Ratings agency Moody’s has further cut its growth forecast for India for 2020 & we only wait for situation to normalise a bit before any fresh forecasts are made.

The biggest task facing the world right now is to stop the spread of the coronavirus. But even when the global public health crisis comes under control and global supply chain disruptions end, business will not return to normal for couple of quarters. As is true for Industry in general, Power sector also is facing issues of all kinds & at this stage, it is too early to assess the complete impact on our production & revenue etc Facing all above factors, we at IEEMA are in close touch with our membership base through concerned Divisions & Regional set ups, steered through full National Executive Council. We are interacting with each other online at regular intervals. This is indeed helping us to be on same page & chalk out a common action plan to be followed internally as well as with Government authorities at central & state levels. I am really overwhelmed with the response shown by you contributing your ideas and time.

A large part of India’s electricity generation capacity, particularly Renewable, is reliant on Chinese supplies. India sources about 80% of its solar modules & cells from China. Nearly 3GW of under-construction solar power projects, worth 160bn rupees ($2.16bn), are at risk of delays when they miss their scheduled commercial operation dates. Same way, there is over dependence on imports of Electronics components & parts for our Industry. Let us learn our lessons through these developments & strive together to be more self-reliant in our R&D & manufacturing and testing facilities at competitive prices. Indeed, now is the time to plan expand into more global markets by broadening our portfolios in next quarters to make up for shortfall in existing products/markets. Recently announced National policy on Electronics is a good step from government to spur radical growth in these lines.

Please continue to collaborate & stay connected amongst us. Together we will come out of this crisis. Let us keep ours & society’s safety uppermost in mind while taking any action. I am sure & hopeful, by the time my address reaches your tables, things must be far better & we are heading towards normalcy.

Stay Safe, stay healthy!!!

R K Chugh

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April 2020

Samvaad...

Dear Members, The situation which has occurred due to the outbreak of COVID-19 is unprecedented and unusual. The situation on one hand threatens human life and LQ GHIHQFH WKH ORFNGRZQ KDV FUHDWHG LPSOLFDWLRQV VRPH RI ZKLFK DUH GLIĂ€FXOW WR see today.

IEEMA immediately deliberated and have put recommendations to Government of India, few of which are as follows.

1. Electrical equipment manufacturers should be allowed to run their factories DQG PRYHPHQW RI UDZ PDWHULDOV PDQSRZHU DQG ÀQLVKHG JRRGV VKRXOG EH allowed. This should be publicized through the media, so that, it is implemented effectively on the ground. $YDLODELOLW\ RI DGHTXDWH ZRUNLQJ FDSLWDO LV D FKDOOHQJH IRU WKH VHFWRU 7R PLQLPL]H WKH FDVK RXWà RZ ,((0$ requests the following: h

Deferment of payment of EPF, ESI and Bonus for a period of 6 months.

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Deferment of GST and TDS deposit for a period of 6 months.

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Using GST credit of companies for paying Government dues.

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Extension of premium due dates of all insurance companies, while coverage should continue.

3. For the past few years, the industry has been facing outstanding payments of approved bills from the Central and State Utilities, Central PSUs and other Government Departments, running into approx. INR 15,000 crores.

This problem has become more acute in the present situation, which is causing a huge stress in the availability and adequacy of liquidity of these companies. Many of these suppliers are Small and Medium Enterprises with YHU\ OLPLWHG ÀQDQFLDO UHVRXUFHV Quick release of these outstanding bills will boost liquidity in the system and help the businesses maintain cash à RZV Additionally, the central funding agencies like REC and PFC needs to explore payments directly to the suppliers / EPC contractors, in agreement with State utilities, for outstanding payments or provide additional affordable credit to these utilities to pay to their suppliers.

4. State and Central Power Utilities to release 50% of the Performance Bank Guarantees of completed projects to unlock substantial amount of working capital.

The above point will help the industry to facilitate the payment of salaries, and meet other obligations.

5. The State Bank of India has already started offering the facility additional loan on existing collaterals at affordable interest rates. Liquidity being a major challenge, IEEMA requests the Government to mandate H[WHQVLRQ RI WKH VDPH IDFLOLW\ E\ DOO RWKHU EDQNV DQG ÀQDQFLDO LQVWLWXWLRQV :KLOH WKH EDQNLQJ VHFWRU FRQWLQXH ZLWK WKH HVVHQWLDO VHUYLFHV KRZHYHU VLQFH WKHUH LV QR LQà RZV LQ WKH EXVLQHVV DFFRXQWV RI WKH FRPSDQLHV DQG RQO\ WKH RXWà RZV DOO WKH WHUP ORDQ ,QVWDOPHQWV (0,V LQWHUHVW SD\PHQW QHHG WR EH SXW RQ KROG GXULQJ WKLV GLIÀFXOW SHULRG 7. Waiver of demurrage at the ports.

8. Waiver of Minimum Demand (MD) in the electricity bill to the industry for 3 months.

Other than the above recommendations, IEEMA Regional committees have also added to the list which is being taken with Central and State Governments to provide immediate relief to our members. ,((0$ XQGHUVWDQGV WKDW WKH LQGXVWU\ ZLOO XQGHUJR VLJQLĂ€FDQW SDLQ DQG ,((0$ VWDQGV E\ LWV PHPEHUV WR UHVWRUH the equilibrium with the help of the government.

Sunil Misra

April 2020

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Contents

the leading electrical & electronics monthly

Volume 11 Issue No. 8 April 2020 CIN U99999MH1970GAP014629 2IÀFLDO 2UJDQ RI ,QGLDQ (OHFWULFDO (OHFWURQLFV 0DQXIDFWXUHUV¡ $VVRFLDWLRQ Member: Audit Bureau of Circulation & The Indian Newspaper Society

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L1 Bidding Mechanism

From the President’s Desk

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Industry Demands Change !

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Samvaad 11

Cover Story L1 Bidding Mechanism: Industry demands change in lowest bidder rule Faster, better or cheaper, pick any two� is the mantra followed by most businesses in assessing the most viable deals. But most Government departments in India have for decades prioritised the “cheaper� over the “better� while giving out contracts, an approach which has impacted the quality of the task executed. In the end, most departments have ended up looking penny wise but pound foolish.

As per the traditional approach, followed by procurement authorities, the objective of the procurement exercise is to choose the lowest bidder who can meet the SUH GHĂ€QHG WHFKQLFDO FULWHULD

This approach has the weight of legal precedent and tradition behind it; being an internationally accepted practice for a long time. However, it has the disadvantage of incentivizing ÀUPV WR RQO\ FRPSHWH RQ SULFH reducing measures. This comes at the expense of innovation and sometimes quality.

8

20

In Depth Ensuring revenue security: Time to plug the gaps

Madhya Pradesh, Haryana, and Maharashtra. Considering 70 units of consumption/household, we estimate an additional revenue gap of ~Rs 3000 crore annually. This additional requirement has to come from either government subsidy or commensurate tariff hike, or a mix of both, to avoid any tariff shock.

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In focus

We have seen how progressive programmes such as RGGVY, DDUGJY, and SAUBHAGYA have led to 100% village and KRXVHKROG HOHFWULÀFDWLRQ RQ WKH one hand, but owing to widening $&6 $55 JDS ÀQDQFLDO VWUHVV RI utilities hasn’t eased, on the other.

Over 90% of the new connection additions come from Uttar Pradesh,

Business Growth through Global Exports – An opportunity for Indian Electrical Industry

April 2020

Contents

In 2018, global energy investment was over $ 1.8 trillion. Out of this, about $300 billion (appx. ` 25.5 lakh crores) was in Transmission and Distribution Networks. China, followed by US and India, was the largest market for energy investment.

ADITYA (Atal Distribution System Improvement Yojana), the new scheme being planned by the Ministry of Power, Government of India to revitalize India’s struggling electricity distribution sector envisages an investment of about ` 3.7 lakh crores in the coming years.

The global electric transmission and distribution equipment market, which includes wire and cable, switchgears, transformers, meters, insulators and capacitors, is expected to reach an estimated $324 billion by 2025 and is forecast to grow at a CAGR of 4.5% to 6% till 2025

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Expert Speak Phazards of electricity and their prevention (OHFWULFLW\ KDV EHFRPH DQ HVVHQWLDO of modern life, both at home and on WKH MRE (OHFWULFLW\ LV SRZHUIXO ,W LV D good friend. But it is also a deadly HQHP\ (OHFWULFLW\ LV RIWHQ UHIHUUHG to as a “silent killer�, because it cannot be tasted, seen, heard, or smelled. It is essentially invisible.

However, we tend to overlook the

43

hazards electricity poses and fail to treat it with the respect it deserves.

The hazards associated with the use of electricity can affect any one. Many electrical devices, such as hot Plates, stirrers, vacuum pumps, lasers, microwave ovens, water heaters, etc., can pose a VLJQLĂ€FDQW KD]DUG SDUWLFXODUO\ ZKHQ mishandled or not maintained.

(OHFWULFLW\ KDV ORQJ EHHQ recognized as a serious workplace hazard, exposing employees to electric shock, electrocution burns, ÀUHV DQG H[SORVLRQV 6SDUNV IURP electrical equipment can serve as DQ LJQLWLRQ VRXUFH IRU à DPPDEOH RU explosive vapours.

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April 2020

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Events and Eventualities Case Studies on Circuit Analysis for Current Transformers Instrument Transformers with its circuitries play the most vital role for the protection, control and PHWHULQJ RI +7 (+7 OLQHV DQG equipments. Abnormalities in these transformers or associated circuits cause remarkable disturbance which in turn some times results instability in the power system ZLWK WHFKQLFDO DQG ÀQDQFLDO ORVV in the network. So the knowledge on its circuitry and basics of the equipments need to be focused to maintain the performance of the instrument transformers along with its functionality in the system.

In this article, various practical studies have been described with actual occurrences in the system related to instrument WUDQVIRUPHUV (DFK RI WKH VWXG\ KDV WKH SUHVHQWDWLRQ Ă RZ RI GHVFULELQJ the Situation with Observations, Action taken, Analysis and Final recommendations to the reader.

These case studies could be quite helpful for the operation, testing and commissioning engineers to develop awareness regarding the smooth control and operation of electrical system in the Grid SubStation.

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Contents

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Tech Sapce Coupled hybrid modelling in ÀUH VDIHW\ HQJLQHHULQJ The construction industry is driven by time constraints and these constraints can lead to compromises in engineered safety[2] $V ZLWK RWKHU ÀHOGV WKLV LV WUXH IRU ÀUH VDIHW\ HQJLQHHUV designers and modellers.

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Index to Advertisers 71

ERDA News

National News India needs to set up manufacturing base for smart electricity meters: Parl panel Government likely to fall short of revised divestment target by Rs 13,000 crore

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Corporate News

India needs to set up manufacturing base for smart electricity meters: Parl panel

Government likely to fall short of revised divestment target by Rs 13,000 crore

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Product Showcase 76

International News Botswana hikes power tariffs by 22 per cent to help loss-making utility Norway postpones decision on $2.2 bln power cable to Scotland

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Editorial Board

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Power Scenario Global Scenario Indian Scenario

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IEEMA Database Basic Prices & Indices Production Statistics

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Sparks Sans Shocks

Advisory Committee Founder Chairman 0U 5 * .HVZDQL

Chairman 0U 5 . &KXJK

Members Mr Sunil Misra 0U 1DYHHQ .XPDU Mr. Vikram Gandotra Mr. Mustafa Wajid Mr. Purnendu Chaubey Mr. Mithul Thakkar Mr. A.S. Subramaniyan

Sub Editor Ms Shalini Singh

Circulation Incharge Ms Chitra Tamhankar Statistics & Data Incharge Mr Ninad Ranade

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Phones: +91 (0) 80 2220 1316 / 1318 Fax: +91 (0) 80 220 1317 (PDLO EDQJDORUH#LHHPD RUJ %UDQFK 2IĂ€FH .RONDWD 503 A, Oswal Chambers, &KXUFK /DQH .RONDWD Phones: +91 (0) 33 2213 1326 Fax: +91 (0) 33 2213 1326 (PDLO NRONDWD#LHHPD RUJ Website: www.ieema.in Articles: Technical data presented and views expressed by authors of articles are their own and ,((0$ GRHV QRW DVVXPH DQ\ UHVSRQVLELOLW\ IRU WKH VDPH ,((0$ -RXUQDO RZQV FRS\ULJKW IRU RULJLQDO DUWLFOHV SXEOLVKHG LQ ,((0$ -RXUQDO Representatives: Guwahati (Assam) - Nilankha Chaliha (PDLO QLODQNKD FKDOLKD#LHHPD RUJ Mobile: +91 9706389965 Lucknow (U.P. and Uttarakhand) $MXM .XPDU &KDWXUYHGL (PDLO DQXM FKDWXUYHGL#LHHPD RUJ Mobile: +91 9839603195 Chandigarh (Punjab & Haryana) Bharti Bisht (PDLO EKDUWL ELVKW#LHHPD RUJ Mobile: +91 9888208880 Jaipur (Rajasthan) Devesh Vyas (PDLO GHYHVK Y\DV#LHHPD RUJ Mobile: +91 8955093854 Bhubaneshwar (Odisha) Smruti Ranjan Samantaray (PDLO VPUXWLUDQMDQ VDPDQWDUD\#LHHPD RUJ Mobile: +91 9437189920 Hyderabad (Andhra Pradesh) Jesse A Inaparthi (PDLO MHVVH LQDSDUWKL#LHHPD RUJ Mobile: +91 9949235153 6ULQDJDU -DPPX .DVKPLU

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April 2020

CoverStory

L1 Bidding Mechanism Industry Demands Change !

“Faster, better or cheaper, pick any two” is the mantra followed by most businesses in assessing the most viable deals. But most Government departments in India have for decades prioritised the “cheaper” over the “better” while giving out contracts, an approach which has impacted the quality of the task executed. In the end, most departments ts have ended up looking penny wise but pound foolish.

As per the traditional al approach, followed by procurement authorities, ies, the objective of the procurement exercise e is to choose the lowest bidder who can meet the pre-defined technical criteria.

This approach has the weight of legal precedent cedent and tradition behind it; being an internationally accepted ed practice for a long time. However, it hass the disadvantage of incentivizing firms to only compete on price reducing measures. This his comes at the expense April 2020

of innovation and sometimes quality. Therefore, in the long run, the L1 criteria may include significant foregone opportunities for delivering value for money.

This is why the NITI Aayog is mulling a plan to review tendering norms, particularly in the L1 g y, to ensure transparency and equal category, op opportunity for all players. IEEMA Jo Journal speaks to some of the exp experts from the Industry about the over process of L1. overall

Mr R RK Chugh, President, IEEMA said, “IEEMA “ recently participated in a Goodbye L1 event organised t together with Niti Aayog where w presented a deep analysis of we the flaws under L1 system on Price b a s i s alone. IEEMA believes that the norms need to be review reviewed simply because far too many c players come up courtesy online bidding processes, without a strict pre pre-qualification process on technical & reliability aspec aspects . With many parties to choose

11

CoverStory from, the organisation concerned, through the L1 benchmark, evaluates them on price alone and dilutes all other deciding factors such as technology, maintenance & overall Life Cycle costing . Often, a supplier makes an aggressive bid, quoting an unimaginable price that does not even cover the cost of production or promises a very slim profit margin. This is done to ensure good testimonials in the market. Once the deal is sealed, all methods of cost-cutting are applied to increase profit margins, mostly at the cost of quality & poor services . In the process, it is not just the customer, who ends up with inferior quality goods or services but also genuine bidders, who eventually lose the race.”

Mr. Neeraj K Nanda, President - South Asia (T&D, Solar) KEC International Ltd said, “The Lowest bid may not be of the highest quality or does not offer all expected features (especially in case of Reverse Auction).

Also there is an undue pressure on Cost impacting quality and delivery. Bids sometimes quoted around 15% below customer budget.

Also the Bidders compromise on technical capabilities to win contract, ultimately resulting in sub-standard delivery/failure of project intent. There is a lack of adoption of best practices in Execution, Innovation, Industry Recognition, etc. due to insufficient profit margins. Overall cost of the project proves to be higher for the buyer due to poor quality and safety standards.”

Speaking at an event “Goodbye L1”, Niti Aayog vice chairman Rajeev Kumar said everyone knows about the defeciencies in the L1 norm and by following this tendering model, government agencies have “tied their hands and feet”. He referred to a concept paper by Central Vigilance Commission which has talked about the need to revisit current norm and how an all-inclusive public procurement strategy is required in sync with a rapidly changing world. It has suggested that conventional L1 method is not suited for major infrastructure projects.

Stressing that greater public support was required for for the change considering the “moral hazard”

12

attached to such a proposal, Union minister Nitin Gadkari said, “The spirit behind the theme ‘Goodbye L1’ is good, the strategy may not be right. If L1 doesn’t get a contract, people feel that the minister or bureaucrats must have made good money. So, there are risks of getting blamed even if intention is good Kumar said the L1 bidding norm not only impacts infrastructure projects but other government works as well. He said the current tendering system affects research laboratories and defence bodies as they find it difficult to get the right quality product because the tenders go to the lowest bidder. Pointing out that the change can happen only if there is a public demand, he said, “Make a bigger coalition and create public opinion. You should spread the discussion how following alternative norms is beneficial and there will be no increase in cost...because of L1 bidding practice we have not been able to create globally competitive infrastructure firms barring only a few.”

Mr AS Subramanian, Vice President - Sales, Energy Management Division, SIEMENS explains, “As per the traditional approach, followed by procurement authorities, the objective of the procurement exercise is to choose the lowest bidder who can meet the pre-defined technical criteria.

This approach has the weight of legal precedent and tradition behind it; being an internationally accepted practice for a long time. However, it has the disadvantage of incentivizing firms to only compete on price reducing measures. This comes at the expense of innovation and sometimes quality.

Therefore, in the long run, the L1 criteria may include significant foregone opportunities for delivering value for money.

The Approach by Power Utilities in China In contrast to this approach, the utilities in China do not use the L1 criterion of selecting successful tenders and instead utilize a more comprehensive framework, the Quality and Cost Based Selection (QCBS) Methodology. In the procedure followed by the Chinese utilities, bidders compete not only on price but also on parameters like quality, innovation, professionalism among others. The ideal bidder in this framework is not the one with the lowest quote but rather one who can offer a competitive price, an innovative product and high quality. In fact the QCBS framework dis-incentivizes companies from quoting the least possible price and the highest price scores

April 2020