Green Hydrogen Push Suffers Setback Following Cancellation Of IOCL’s Tender

The Indian Oil Corporation (IOCL) has scrapped the tender for the construction of the state run company’s green hydrogen plant at its Panipat Refinery and Petrochemical Complex, Haryana. This decision follows heated controversies surrounding purported conflicts of interest, prompting potential bidders – mainly the key players in industry – to challenge the bidding process in court. The move is widely seen as a setback in the push to test the viability of a green hydrogen ecosystem early in India, with IOC seen as a bankable name for bidders.

The alleged faulty nature of the tender from IOCL resulted in the lone submission from an IOCL-led consortium.

THE CONTENTIOUS TENDER

In a corrigendum issued on February 21, IOCL officially announced the cancellation of the tender. The Independent Green Hydrogen Producers’ Association (IGHPA) took the matter to the Delhi High Court in November 2023, alleging partiality in the tender terms. Notable industry players such as Azure Power, Acme Group, Fortum India, O2 Power, Sprng Energy, and SunEdison Infrastructure are affiliated with IGHPA. The key point of contention being the clause providing the first right of refusal to IOC for any purchases.

In August 2023, IOCL had solicited bids for constructing a green hydrogen generation unit with a capacity of 10 thousand tonnes per annum (KTA) on a BOOT model at its Panipat Refinery, spanning 25 years. This marked the first instance in India where the pricing of green hydrogen was to be determined through a competitive bidding or market-driven process. Consequently, the cancellation is viewed as a significant setback.

The selected bidder was expected to supply hydrogen gas within 30 months from the issuance of the letter of award. The project entailed 75 megawatts (MW) of electrolyzer capacity, generating 300 MW of clean energy, with a total capital expenditure (capex) estimated at $400 million, as indicated by industry stakeholders.

SCUTTLING COMPETITION?

With a capacity of 10 KTA, this plant was poised to be one of the largest green hydrogen facilities in India. However, industry insiders highlighted several clauses in the bidding documents that they argued skewed the playing field heavily in favor of GH4India Pvt. Ltd. This company is a joint venture comprising IOCL, engineering giant Larsen & Toubro (L&T), and renewable energy firm ReNew, established during 2022-2023 for green hydrogen development, along with its derivatives like green ammonia and methanol, as well as associated renewable assets, under any ownership or operational model.

The  inclusion of a right of first refusal clause in the tender notice allowed IOCL JV – GH4 India Private Limited – to participate in the bidding process and match the lowest bid if they were not the initial lowest bidder. That has not gone down well with the other bidders.

Many industry participants argued that such a provision contradicts the public procurement regulations of the Central Government since a public sector entity (IOCL) was seemingly favoring a joint venture to have priority over other bidders. This raised concerns about a blatant conflict of interest, undermining the principles of fair competition.

This clause dissuaded companies from participating, as it appeared to discourage competitive bidding. Consequently, only GH4 India submitted a bid, emerging as the sole bidder for the tender.