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CEA warning may hurt Chinese firm

CEA warning may hurt Chinese firm
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First Published: Wed, Jul 22 2009. 11 45 PM IST

Stiff competition: Bhel chairman and managing director K. Ravi Kumar. Sanjit Das / Bloomberg
Stiff competition: Bhel chairman and managing director K. Ravi Kumar. Sanjit Das / Bloomberg
Updated: Wed, Jul 22 2009. 11 45 PM IST
New Delhi: India’s apex power sector planning body has written to state electricity boards, public and private utilities, and private power generation firms that power equipment maker Shanghai Boiler Works Ltd (SBWL) may not have the legal right to supply so-called supercritical boilers in India.
Stiff competition: Bhel chairman and managing director K. Ravi Kumar. Sanjit Das / Bloomberg
The move, apart from hurting the prospects of the Chinese firm in India, could also affect the plans of power companies that have ordered boilers from the Chinese company.
The Central Electricity Authority’s (CEA) move comes in the wake of concerns raised by French power equipment firm Alstom SA that its Chinese licensee, SBWL, is authorized to sell the boilers only in China. In India, Alstom has an alliance with state-owned Bharat Heavy Electricals Ltd (Bhel).
“There is a concern raised by the ministry of heavy industries, which we have forwarded to all the states, utilities and independent power producers,” said Rakesh Nath, chairman of CEA.
Bhel falls under the purview of the ministry of heavy industries and public enterprises. SBWL is a subsidiary of Shanghai Electric Power Co. Ltd.
“The ministry of heavy industries has given us a letter from Alstom. This is a legal issue. It is for the companies (buying from the Chinese firm) to take a call. We have asked the stakeholders to take care as there is a legal problem here,” said another CEA official, who did not want to be identified.
A Bhel executive said his firm had written to the ministry. “We have an exclusive arrangement with Alstom in India. CEA has got the details. Shanghai cannot sell their boilers here,” said K. Ravi Kumar, chairman and managing director of Bhel.
Several Indian power project developers have placed orders with Chinese firms such as DongFang Electric Corp., Shanghai Electric and Harbin Power Equipment Co. Ltd, largely on account of the inability of local manufacturers to meet growing demand for equipment in one of the world’s fastest growing major economies. Indian power project developers have placed orders with Chinese firms for equipment to generate around 22,000MW of power. Chinese equipment costs less and is immediately available.
Bhel has been badly hit by Chinese inputs. The company’s chairman and managing director had earlier told Mint that Bhel’s market share could decline to 50% from the current 60% over five years because of competition from domestic and foreign firms.
Questions emailed to Shanghai Electric on Tuesday remained unanswered.
In an email reply to Mint, an Alstom spokesperson said, “Alstom confirms that it has licensed Shanghai Boiler Works of China to sell supercritical boilers only in China and has informed Bhel accordingly. We would like to reiterate our commitment to intellectual property rights (IPR) laws everywhere in the world.”
“Alstom, the collaborator of Bhel for the manufacture and sale of boilers for supercritical thermal power projects, has said that its China licensee, Shanghai Boiler Works, cannot sell its boilers in India. If indeed any of our licensees violates IPR stipulations, Alstom will take appropriate measures in order to protect our rights,” the spokesperson added.
Mint had reported on 16 October that CEA’s audit of Chinese power equipment, which was completed without the participation of any of the companies involved, had found several problems with such machinery.
However, the report, which had raised questions about the operation and maintenance of such equipment, the lack of a comprehensive quality plan and the insufficient number of Chinese engineers at site locations, did not prevent power projects from using them.
“This (CEA’s communication) will affect Shanghai’s business in India as developers will be wary to go to them. Developers need to carefully assess whether the Chinese power equipment manufacturers have the licence to supply outside China,” said Shubhranshu Patnaik, an executive director at audit and consulting firm PricewaterhouseCoopers.
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First Published: Wed, Jul 22 2009. 11 45 PM IST