New Delhi: India’s ambitious plans to quickly ramp up its critical power capacity took an unexpected hit as a key Chinese supplier of equipment was dealt a blow by the recent devastating earthquake in the Sichuan province that claimed more than 41,000 lives.
The tremors that have destroyed some of Dongfang Electric Corp.’s manufacturing facilities may delay equipment orders worth Rs32,000 crore, or enough to produce 8,000MW of power.
“Dongfang’s manufacturing facilities have been affected by this tragedy and because of this a lot of orders placed by the Indian power project developers will be affected,” said a senior government official who did not wish to be identified because he isn’t authorized to speak to the media.
Dongfang has informed the Hong Kong stock exchange that factories of its unit— Dongfang Steam Turbine Co. in Hanwang town, Sichuan province—were seriously damaged by the 12 May earthquake. Wen Ya, its chief representative in India, said, “We do not have any information from China.” He said he hasn’t been able to reach his office headquartered in Sichuan.
India has been leaning on Chinese power equipment makers not only becauseshipping the goods from its neighbour is quicker and more cost-effective, but also because the equipment is priced more competitively than other suppliers such as the Europeans. Manufacturers in India are struggling to execute projects with their own order books bursting at the seams. Bharat Heavy Electricals Ltd, India’s largest maker of power generation equipment, has an order book of Rs90,000 crore, whereas the country’s needs are for equipment worth Rs3 trillion.
Devastating blow: Workers stand near the ruins of a fertilizer factory at Hongbai in Shifang county of China’s Sichuan province. (Greg Baker / AP)
Dongfang is already working on a few projects in India, including two projects of the West Bengal Power Development Corp. with capacities of 600MW and 300MW at Sagardighi and Durgapur, respectively. It also won orders totaling 2,215MW from Lanco Infratech Ltd projects and plant orders for Durgapur Projects Ltd. D.V. Rao, joint managing director at Lanco, however, said that the tragedy won’t affect the company’s generation targets because “DEC (Dongfang) is reviewing the effect of the damage to the delivery schedules and making alternative arrangements to meet the delivery schedules committed to us.” He didn’t elaborate.
Analysts say delivery schedules could be delayed.
“There is always a chance that some Indian power project schedules can be affected. However, if anybody has a chance of recovering quickly, they (Dongfang) have it. We need to wait and see for a clear situation to emerge,” said Anish De, chief executive officer at Mercados Asia, an energy consulting firm.
Dongfang has a manufacturing capacity of 31,000MW per year. The company manufactures equipment for large hydroelectric power stations, thermal power stations and nuclear power stations. It also routinely bids for contracts for setting up power-generation stations and has taken up power project contracts in more than 10 countries.
India has drawn up plans to generate 78,577MW of power in the next five years and has farmed out orders to other overseas suppliers as well. Equipment for about 20,000MW has been ordered from Chinese firms such as Shanghai Electric and Harbin Power, but nearly 40% of the order is sitting with Dongfang.
Dongfang plans to set up a manufacturing base in India as reported by Mint on 23 February 2007. The company also plans to jointly bid for power projects in India and is eyeing the government’s 4,000MW ultra-mega power projects.