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Indiabulls cancels China’s Shandong power contract

Indiabulls cancels China’s Shandong power contract
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First Published: Thu, Mar 18 2010. 10 23 PM IST

Graphic: Ahmed Raza Khan / Mint
Graphic: Ahmed Raza Khan / Mint
Updated: Thu, Mar 18 2010. 10 23 PM IST
New Delhi: In a setback to Chinese power generation equipment suppliers,Indiabulls Power Ltd has cancelled a contract awarded to Shandong Electric Power Construction Corp., or Sepco, for its Amravati project.
Graphic: Ahmed Raza Khan / Mint
Indiabulls cancelled the engineering, procurement and construction order for the first phase of the project, estimated at around Rs3,000 crore, as the Chinese company is unlikely to meet the commissioning schedule of 39 months due to the Indian government’s new stringent visa policy.
Chinese firms have complained earlier of bias preventing them from winning key contracts in India, but this is the first power sector order to a Chinese firm to be cancelled.
While the number of work visas have been increased to 40 per electricity generation project, from 20, at the behest of the power ministry, a shortage of Chinese workers is stalling the construction of some power plants.
Indiabulls has now placed the order with state-owned Bharat Heavy Electricals Ltd, or Bhel.
The change in contractor, however, required a reconfiguration of the unit size from two units of 660MW to five units of 270MW, according to the minutes of a meeting of an expert committee that looks at the environmental impact of thermal power projects, under the aegis of the ministry of environment and forests.
The project in Maharashtra’s Amravati district is planned to have two phases of 1,320MW each.
Questions emailed to Indiabulls remained unanswered. A senior Bhel executive confirmed the company had received an order for the utility’s 1,320MW project in Amravati.
In a statement on 2 March, India’s largest power generation equipment maker had said orders for greenfield power projects, valued at Rs5,778 crore, at “Nasik (5x270MW) and Amravati (5x270MW), both in Maharashtra, has been placed on Bhel by Elena Power & Infrastructure Ltd (EPIL), a company of the Indiabulls group”.
“The cancellation of (the) order will affect the morale of the Chinese firms,” said Shubhranshu Patnaik, executive director at audit and consulting firm PricewaterhouseCoopers. “You have to make provisions that the orders placed with Chinese companies get commissioned.”
India could fall short of its targeted 13,000MW of power generation capacity addition during 2009-10 by around 4,000MW because of the visa hurdles, as reported by Mint on 14 December.
Several Indian power project developers have placed orders for equipment to generate 43,000MW with Chinese firms such as Shanghai Electric Group Co. Ltd, Dongfang Electric Corp. and Harbin Power Equipment Co. Ltd, largely due to the inability of local manufacturers to meet the growing demand for equipment.
Of the total orders placed with Chinese suppliers, around 40% are with Dongfang. Chinese equipment is relatively inexpensive and immediately available.
China exported $31.33 billion (around Rs1.43 trillion) worth of goods to India in 2008-09.
Questions emailed to Sepco, too, remained unanswered. Li Qi, in charge of Dongfang’s India office and its chief representative in the country, said, “Sepco didn’t have enough visas. That is the problem.”
Bharatsinh Solanki, Union minister of state for power, had informed the Rajya Sabha on?24?November that?due to the visa policy, new power plants being constructed by Chinese firms would get delayed.
India has already lowered power generation targets for the 11th Plan to 62,000MW from 78,577MW. Progress so far has been limited, with only 9,300MW of generation capacity added in 2007-08 against a target of 12,000MW. Only 3,500MW was added against a target of 11,000MW in 2008-09.
padmaparna.g@livemint.com
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First Published: Thu, Mar 18 2010. 10 23 PM IST