New Delhi: Reliance Power Ltd (R-Power) is buying $10 billion (around Rs44,500 crore) of boiler, turbine, generator (BTG) packages from Shanghai Electric Power Co. Ltd of China for coal-based power plants, in what it claims is the world’s largest such order.
The equipment ordered on Thursday by the company, a part of the Reliance-Anil Dhirubhai Ambani Group (R-Adag), is sufficient to generate 30,000MW, an R-Power statement said. Supplies have already started and are expected to be completed in the next three years, it added.
R-Power and Shanghai Electric signed in-principle agreements with Chinese banks for up to $12 billion of financing, R-Power said. “The strategic cooperation between Reliance Power and a leading global supplier like SEC will enable faster project execution of our projects,” R-Power chief executive officer J.P. Chalsani said in the statement. “SEC’s after-sales support will ensure higher availability and assured maintenance support through the operating life of our projects.”
R-Power has, in its portfolio of projects, 37,000MW of power generation capacity, of which 600MW is operational. It has been the most successful firm in winning the so-called ultra mega power projects that will generate 4,000MW of power each.
Of the four such projects so far awarded, R-Power has won three—at Sasan in Madhya Pradesh, Krishnapatnam in Andhra Pradesh and Tilaiya in Jharkhand. Tata Power Co. Ltd has won the fourth, at Mundra in Gujarat. R-Power has already placed orders for equipment for the Sasan and Krishnapatnam projects with Shanghai Electric.
The Union government has been contemplating a 5% customs duty on all imported power generation equipment to create a level playing field for domestic manufacturers. The power ministry is not in favour of such a move until after the start of the 12th Plan period (2012-17). A panel of secretaries had earlier decided on 5% customs duty, 10% countervailing duty and special additional duty of 4%.
“The competitive position of Chinese imports has not changed despite the Indian government proposal of the imposition of import duty,” said Shubhranshu Patnaik, senior director, energy and resources, Deloitte India. “It is a fact that a majority of private sector power generation equipment orders are with Chinese suppliers.”
Planning Commission member Arun Maira had recommended a 14% import duty on power generation equipment to strike a balance between protecting local manufacturers and the need to import equipment to boost power production, Mint had reported on 10 February.
State-owned Bharat Heavy Electricals Ltd and Larsen and Toubro Ltd (L&T) had been lobbying with the government to limit Chinese competition. L&T chairman and managing director A.M. Naik has been seeking a 25% anti-dumping duty on Chinese products.
“This order is likely to strengthen the Chinese BTG equipment suppliers’ presence in India,” said Amol Kotwal, deputy director of the energy and power systems practice at Frost and Sullivan for South Asia and the Middle East. “The imposition of import duty on power generation equipment has been deferred till 2012. It is left to be seen what duties will be applicable for the 12th Plan period.”
Indian power utilities have ordered equipment to generate 26,000MW annually from Chinese firms largely because of the inability of local manufacturers to meet demand. Chinese equipment is also relatively cheaper.
(Reliance Power has sued HT Media Ltd, publisher of Mint, in the Bombay high court over a 12 May front-page story in Mint, that it disputed. HT Media is contesting the case.)