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NTPC to stop bulk tendering for equipment

NTPC to stop bulk tendering for equipment
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First Published: Wed, Aug 17 2011. 11 35 PM IST
Updated: Wed, Aug 17 2011. 11 35 PM IST
New Delhi: In an attempt to create a level playing field for all power generation equipment manufacturers in the country, state-run NTPC Ltd plans to opt out of the current practice of bulk tendering that includes conditions, which assures orders go to another state-owned firm Bharat Heavy Electricals Ltd (Bhel).
This assumes significance given the plans of India’s largest power generation utility.
NTPC currently has a power generation capacity of 34,854 megawatts (MW) and has projects totalling 14,088MW under construction. Equipment for 16,192MW is under the tendering process, with the firm targeting an installed capacity of 75,000MW by 2017 and 128,000MW by 2032. NTPC plans to award orders for equipment meant to generate 40,000MW during the 12th Plan (2013-17) for value of about Rs 2 trillion.
“Going forward, we may place equipment orders for our projects even individually for specific projects,” said NTPC chairman and managing director Arup Roy Choudhury. “Bulk was a condition to attract foreign power generation equipment makers. There were also conditions to protect Bhel’s interests. Foreign players have come in. Going forward, we’re in the free market.”
Since the goal of encouraging local manufacturing has led to foreign firms setting up domestic joint ventures (JVs), there is no need for the earlier dispensation, according to NTPC. The move has also not kept the Chinese from competing with India’s biggest power equipment maker.
Bhel has been facing competition from Chinese power generation equipment manufacturers such as Shandong Electric Power Construction Corp., Shanghai Electric Group Co. Ltd, Dongfang Electric Corp. Ltd and Harbin Power Equipment Co. Ltd, both in the domestic and overseas markets. It posted a net profit of Rs 6,011 crore on revenue of Rs 43,337 crore in the fiscal ended 31 March. Bhel has an order book position of at least Rs 1.64 trillion and an annual capacity of 15,000MW. It aims to become a $10 billion-plus firm by 2012.
“The purpose of bulk orders has been solved. Why should we wait for the orders to be clubbed and then place them,” asked another NTPC executive, who didn’t want to be named. “In the case of bulk tendering, we have to go to the cabinet every time. It is time-consuming. However, it does not mean that the Chinese will be allowed to participate in the bids as Central Electricity Authority has made it mandatoryfor a supplier to have a manufacturing base in India.”
Part of the Union government’s agenda for its first 100 days, the bulk order initiative included preconditions for the supplier to set up manufacturing facilities in India and partially safeguarded Bhel’s interests.
“The only benefit of bulk tendering was to encourage domestic manufacturing,” said Shubhranshu Patnaik, senior director (energy and resources) at Deloitte India. “In the long run, open tendering is good and has to happen at some point of time.”
NTPC has already floated two tenders for 20 supercritical units valued at Rs 38,000 crore, making it the largest such individual order in India. Boilers and turbines using supercritical, or very efficient, technology achieve high power plant efficiencies and economies of scale. The first order is for the supply of 11 boilers and 11 turbines of 660MW each. The second one is for supplying boilers and turbine generators for nine units of 800MW each.
These orders saw widespread interest from the private sector, with JVs being formed between Larsen and Toubro Ltd and Mitsubishi Heavy Industries Ltd; Toshiba Corp. of Japan and the JSW Group; Ansaldo Caldaie SpA of Italy and Gammon India Ltd; Alstom SA of France and Bharat Forge Ltd; BGR Energy Systems Ltd and Hitachi Power Europe GmbH, and Thermax Ltd and Babcock and Wilcox Co.
“This was a special dispensation only for these two tenders. After this we will have to compete for orders like everybody else,” said B.P. Rao, chairman and managing director of Bhel.
utpal.b@livemint.com
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First Published: Wed, Aug 17 2011. 11 35 PM IST
More Topics: NTPC | Bhel | Arup Roy Choudhury | Deloitte | L&T |