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Bhel seeks to join Chinese firm for 120MW Zambian project

Bhel seeks to join Chinese firm for 120MW Zambian project
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First Published: Thu, Jul 21 2011. 10 17 PM IST
Updated: Thu, Jul 21 2011. 10 17 PM IST
New Delhi: State-owned Bharat Heavy Electricals Ltd (Bhel) wants to supply electromechanical equipment to China’s Sinohydro Corp. for a 120 megawatts (MW) hydropower project in Zambia for which India has offered a $50 million (Rs222?crore today) line of credit.
“Since this project is part funded by the government of India and we are a government of India enterprise meeting all criteria for award of any order under the government line of credit, we would like to be considered for this supply,” Bhel said in an email to Sinohydro on 15 June. Mint has reviewed the email.
“We had written to the ministry of external affairs about the Zambian project going to the Chinese firm...we have approached Sinohydro to supply electromechanical equipment for the project valued at $50 million a month back,” said a Bhel executive, asking not to be named.
“We are still pursuing the issue with Sinohydro,” said another Bhel executive, requesting anonymity.
Telephone calls to Sinohydro went unanswered. An Indian foreign ministry spokesman declined comment.
The Export-Import Bank of India, or Exim Bank, signed an agreement with the government of Zambia in January 2010 to extend a $50 million line of credit for the $200 million Itezhi Tezhi project.
A line of credit from India is a specified amount a borrower may obtain without special checks at a concessional interest rate of 1.75%. The government has said that 75% of the equipment purchased through its line of credit must be sourced from India.
Bhel and India’s Patel Engineering Ltd jointly bid for the project. But despite India agreeing to partially fund its development, Zambian government-owned Zambia Electricity Supply Co. Ltd (Zesco) awarded the engineering, procurement and construction contract to Sinohydro, Mint reported on 22 January 2010.
Zesco is developing the project as an equal joint venture with Tata Africa Holdings (SA) (Pty) Ltd and the $50 million line of credit is meant to go towards Zesco’s equity participation in the project.
Questions emailed to Zesco were not answered.
“Utilities generally go to China because of cheaper loans and the proactive nature of the Chinese government,” said a Bangalore-based power sector analyst who did not want to be named. “Whether Bhel gets the package or not, the project going to a Chinese firm is definitely embarrassing for India.”
India has also extended a $75 million line of credit to Zambia for augmenting power generation capacity, among other things.
The Exim Bank extends credit lines to overseas financial institutions, regional development banks, governments and other overseas entities to enable buyers in those countries to import goods and services from India on deferred credit terms.
Both India and China have extended lines of credit to build infrastructure in energy-rich African countries as they seek access to mineral resources to fuel their growing economies. At the India-Africa Forum Summit held in India in 2008, the Indian government announced credit lines of around $5.4 billion by 2012 to African countries. Prime Minister Manmohan Singh announced another $5 billion for the next three years under lines of credit at India-Africa summit in Addis Ababa this year.
Zambia’s power demand is around 1,700MW, which is expected to rise substantially because of demand from the copper mining sector.
Zambia is a major exporter of the metal and its overseas sales are expected to expand as global demand for the metal increases. The Itezhi Tezhi hydropower project is an important part of the nation’s plan to meet demand from copper miners.
Elizabeth Roche contributed to the story.
utpal.b@livemint.com
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First Published: Thu, Jul 21 2011. 10 17 PM IST
More Topics: Bhel | Government | India | Sinohydro | China |