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— Tapas Chakraborty, Head - Business Development &
Service Delivery, buyjunction
buyjunction is the e-procurement arm of mjunction services ltd,
which is amongst India's largest eCommerce company. mjunction
has successfully implemented eprocurement solutions for
BHEL, Power Grid Corporation of India in their plants and units
across India. Tapas Chakraborty explains how e-procurement can
help power utilities to turn commercially efficient, and also how
online reverse auctions can be a superior alternative to the
traditional "L1" mode of procurement. An interview by
Venugopal Pillai.
To start with, please elaborate on the nature and extent of
commercial losses of state government-owned power
distribution utilities. Has "trifurcation" of erstwhile state
electricity boards made power distribution utilities more
commercially efficient?
'Trifurcation' of state electricity boards (SEB) is dividing or
unbundling them into separate power generation,
transmission and distribution entities. This was done to reduce
the inefficiency of the combined entity where one component
was always loss making, but the combined entity banked on a
profit making component to avert declaration of loss. Dividing
them, the flaws became more transparent and efforts can be
made to bring loss making units to profitability. We have
already been approached by some of these divided entities to
offer eCommerce solutions as they are now desperate to make
a turnaround.
Assuming that procurement procedures of power utilities are
cost-ineffective, to what extent is this responsible for the
overall commercial inefficiency of utilities?
The number of customers for profitable power utilities
increases continuously as they ensure power supply reliability,
power quality and service level. Transformers and cables for
new substation required have to be bought competitively and
within short time. Urgent breakdowns also have to be attended
promptly by equipment makers. Unless the procurement
process is backed by strong process ensuring quick delivery, it
is natural for the utility to work with old mechanical systems
and old meters which would lead to improper billing. This would
finally lead to commercial inefficiency.
Tell us about the key changes that e-procurement would bring
to power utilities. Do you regard e-procurement to be the
stepping stone for their eventual financial turnaround?
eProcurement would help power utilities in two ways. It would
help utilities to get connected to big vendors who supply quality
products. Faster negotiation in eCommerce platform would
bring down cost and reduce implementation time to expedite
earning cycle.
We get the impression that procurement and tendering policies
of state power utilities are intrinsically flawed, for instance the
archaic "L1" practice is still followed. Do you think that eprocurement
should be supplemented by a revision in the
underlying policies as well?
We have come out of the archaic "L1" practice in PSU long ago
in reverse auctions and our method of operation has been
approved by Central Vigilance Commission (CVC). "L1" is
discovered dynamically driven by market forces through this
online method and not by a set of purchase officers.
Please discuss the e-procurement solutions that buyjunction
has devised for utilities like BHEL, PGCIL, etc.
We have digitized the procurement process for six plants of
BHEL and similar exercise is on in PGCIL. Digitizing helps to
remove paperwork and decisions can now be taken faster for
data transparency. Reverse Auction would then help both of
these clients to negotiate with reputed vendors dynamically
bringing more cost savings for the buying company.
The Union government has enthusiastically announced eprocurement
as a "mission-mode" objective. What is the
ground reality at the implementation level?
We see PSUs are now urging us to associate with them as a
result of this objective set.
You spoke about reverse auctions. Could you elaborate?
All of us are conversant with auctions of antiques and precious
article. In that process, there is one seller and many buyers and
price rises as buyers gives bids. When put on an online
platform, we term it as forward auction. In a reverse auction
process, it is just the opposite. There is one buyer and many
sellers and price falls as sellers gives bids. In reverse auction,
there is no need to make comparison sheets (or CS) with which
purchasers doing manual negotiation usually have a hectic
time post receiving quotes. Before conducting reverse auction,
suppliers need to agree on a set of commercial conditions and
have to qualify on the technical parameters. Then only he would
be allowed to put his bid. The bidding goes on till none of the
suppliers can give a lower bid. The "L1" bidder so emerged then
approached the client for order and order is made on the
negotiated "L1" price.
Please discuss your plans of serving state government power
distribution utilities (SDU) through e-procurement solutions.
Do you have any SDU on your client list as yet?
We are working currently with BHEL, PGCIL, Tata Power, Jindal
Power and Suzlon as of now, in the power sector. Currently
SDUs are also on our target list.
We feel that e-procurement solutions could be extended to
several other areas, apart from power. What is buyjunction's
plan to this effect?
We are well grounded in the steel industry and we have
both integrated plants as well as the secondary producers as
our clients.
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