New Delhi: Chinese power-generation equipment manufacturer Dongfang Electric Corporation plans to set up a manufacturing base in India, creating what could be a major competitor to Bharat Heavy Electricals Ltd (Bhel).
The move comes at a time when the government is concerned about the Indian manufacturing giant’s ability to supply equipment that can help meet soaring power generation requirements as well as India’s ambitious target of adding around 68,870MW of power in the next five years.
That power-generation target is a major stretch, given the country failed to meet the 41,110MW capacity-generation target in the current Five-year Plan that started in 2002.
A number of projects have been delayed on account of the power generation equipment delivery delays resulting in more than a 50% shortfall to date.
As reported on 16 February in Mint, the government was already considering banning Bhel from bidding on some new power projects because of its potential capacity constraints. If taken, that decision would open up the domestic power equipment market to foreign players such as Alstom and Siemens. And Dongfang appears to be seizing the first-mover advantage.
“We had a meeting with the Dongfang team a few days back and they are more than willing to set up a manufacturing base in the country, given the enormous demands that we have,” said a senior power ministry official who did not want to be identified. “The investments are going to be huge.”
There was no immediate response to questions that were sent by email.
Power sector experts said that greenfield, or new, capacity to manufacture boilers, turbines and auxiliary units, which are the building blocks of power plants, will cost anywhere close to Rs18,000 to Rs20,000 crore.
Dongfang manufactures equipment for large hydropower stations, thermal power stations and nuclear power stations. It also bids for contracts for setting up power-generation stations and has taken up power-project contracts in over 10 countries. It has already supplied equipment to West Bengal Power Development Corp.
Dongfang’s efforts, however, may only start showing results in the 12th Plan (2012-17) as it usually requires a minimum of about four years to set up such a manufacturing facility from scratch.
But, the move makes sense for the Chinese company as the Indian government is open to offering incentives to foreign manufacturers who are willing to establish local manufacturing facilities by guaranteeing orders worth 10,000 MW. The Indian government allows 100% foreign direct investment in the power sector.
To start with, Dongfang may first set up a sales, spares and service office in India and then get into the manufacturing of equipment.
“We are being realistic as there is an immediate need to source equipment. We do not have a problem if Dongfang manufactures in China and then exports the equipment to India as an interim measure,” said the power ministry official.
Dongfang uses technology from Alstom for boilers and Toshiba for turbines and has a current manufacturing capacity of 28,000MW per year. This compares with Bhel’s 7,500MW capacity per year, which the company plans to augment to 15,000MW by 2009.
India added power generation capacity of 17,995 MW by December, some 50% lower than what it had hoped to in the past five years.
India has an electricity-generation capacity of about 1.28 lakh MW.