Domestic mfg of equipments key for power projects

New Delhi: The Centre has paved the way for mandatory domestic manufacturing for future power equipment contracts to be awarded in the country.

It has spelt out clear norms stipulating that participants in the bidding process for all new ultra mega power projects (UMPPs) would be entitled to source equipment only from equipment suppliers who provide upfront commitment for progressive indigenisation of technology.

Besides, firms that place winning bids for power major NTPC Ltd’s bulk tendering of its upcoming seven 660 MW supercritical units would have to set up a base in India with a phased manufacturing programme (PMP), while those already having a base here would be required to ramp up their facilities.

The move, being seen as a shot in the arm for the domestic power equipment manufacturing sector, is aimed at restricting cheap imports of power equipment (especially of Chinese equipment). Meanwhile project developers try to clamp down on costs to bag projects based on the Government’s tariff-based competitive bidding guidelines.

The step comes in the wake of fresh assessments made by the Government, according to which an estimated 18,000-20,000 MW of new generation capacity in the country is likely to be set up using Chinese equipment between now and 2020.

Over 15 utilities across the country have already placed orders with Chinese equipment manufacturers such as Dongfang Electric Corporation, Shanghai Electric (Group) Corporation, Sichuan Machinery and Equipment Corporation and Shandong Electric Power Construction Corporation.

Dongfang Electric Corporation, which is China’s largest power equipment supplier, is already in the process of setting up a manufacturing base in West Bengal. This would be the first manufacturing unit set up by a Chinese company in India.

The move comes at a time when dumping charges have been levelled by State-owned equipment major Bharat Heavy Electricals Ltd (BHEL) against Chinese companies to grab equipment supply contracts for mega power projects. In terms of performance, BHEL officials maintain that its equipment were much better, referring to independent studies that establish that the plant load factor of BHEL projects was 90 per cent while it was 60 per cent in the case of those using Chinese equipment.

BHEL is currently ramping up its power equipment manufacturing capacity to 15,000 MW, while engineering major Larsen & Toubro is expected to have a capacity of around 4,000 MW in place by the next couple of years. The newly-formed BHEL-NTPC joint venture company, which is planning to enter equipment manufacturing, is reportedly eyeing a capacity of 4,000-5,000 MW by end-2012.