New Delhi: In what could be a big boost to the capital goods industry, the Congress-led United Progressive Alliance government is poised to place a Rs18,150 crore order for the supply of power equipment to state-run NTPC Ltd and Damodar Valley Corp. (DVC).
Part of the government’s agenda for its first 100 days, the order is an initiative designed to attract investment and create jobs in the domestic power equipment industry. The offer will include a precondition for the supplier to set up manufacturing facilities in India.
Other 100-day agenda items related to the power sector include adding 5,653MW of generating capacity by August and proposals for so-called ultra mega power projects, or UMPPs, to be located in Tamil Nadu, Gujarat and Orissa, and moves to encourage competition in developing transmission projects through tariff-based competitive bidding. UMPPs, with a capacity of 4,000MW each, are aimed at reducing power shortages in the country.
A notice inviting tenders for the purchase of boilers and turbines, which make up the bulk of the equipment to be bought under the order, will be floated by NTPC, India’s largest power generation utility.
“A note will be sent to the Prime Minister’s Office shortly,” said a senior government official involved in the exercise, who did not want to be named.
“We are ready with the preparations and hope to float the tender before August,” said a senior NTPC executive, who also did not want to be named.
Boilers and turbines using supercritical, or very efficient, technology achieve high power plant efficiencies and economies of scale. The government plans to place the order for 11 boilers and 11 turbines of 660MW each for NTPC and DVC, which operates thermal power stations.
The government is inserting conditions in the tender to partially safeguard the interests of the country’s largest power equipment manufacturer, the state-owned Bharat Heavy Electricals Ltd, or Bhel.
The lowest bidder for boilers will be given an order for six units. If Bhel is the lowest bidder, it will get the entire order. If it is not, the government will still award it the remaining five units (of the 11), provided it agrees to match the lowest bid. If Bhel is unable to do so, an option will be given to other bidders based on their ranking. A similar system will be followed while ordering the turbines.
“We will be very competitive and are eagerly looking forward to this tender,” said K. Ravi Kumar, chairman and managing director, Bhel.
Bhel has an annual capacity of manufacturing equipment that can generate 10,000MW of electricity. The firm says it plans to raise this to 15,000MW a year by December.
The government is concerned about Bhel’s ability to meet the demand for equipment as India seeks to add capacity of around 78,577MW of power in the next five years. Currently, India faces an electricity shortage of 12% during peak demand.
Private sector joint venture firms expected to participate in the tender include Toshiba Corp. of Japan along with JSW Group; Ansaldo Caldaie SpA of Italy and GB Engineering Enterprises Pvt. Ltd, Larsen and Toubro Ltd and Mitsubishi Heavy Industries Ltd of Japan.
“Favouring Bhel is perfectly normal on the part of the government since it is a PSU (public sector unit). This is a pretty big order and a very positive development for the capital goods industry,” said Girish Solanki, a Mumbai-based research analyst at Angel Broking Ltd.
The government also plans to modify the so-called mega power policy relating to thermal power plants of 1,000MW and above, and hydroelectric projects of 500MW and above. The changes in the policy would entitle such projects to fiscal incentives, including a waiver of customs duty on equipment imports and a 10-year tax holiday. Hydro projects will be allowed to sell 40% of the power they generate and thermal plants 15% to buyers outside of long-term power purchase pacts.
There will also be no mandatory requirement of privatization of distribution in the power purchasing states or inter-state sale of power.