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Power sector’s lost chance

Power sector’s lost chance
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First Published: Tue, Jul 26 2011. 01 24 AM IST

By Jayachandran/Mint
By Jayachandran/Mint
Updated: Tue, Jul 26 2011. 01 24 AM IST
Early this month, Union power minister Sushil Kumar Shinde proudly announced to a group of MPs that the country’s installed power generation capacity has vaulted in the last four years by as much as 1.8 times than recorded during the five preceding years, the period of the 10th Plan.
By Jayachandran/Mint
To shine by contrast is only too easy, given the modest targets and poor performance in the previous Plan periods. Average levels of electricity shortage still hover around the 7% mark while the peaks cross the double-digit mark.
For sure, the catch-up game is not an easy one—the purchasing distribution utilities are financially fragile and power sale is fraught with risk of default. On the fuel side, domestic coal, the cheapest source, is largely
in the hands of a public sector that mines it at a lethargic pace. Hydroelectric projects, on the other hand, have long gestation periods. And import options are expensive; be it coal, or gas; and that takes us back to the first issue—higher power bills raise project risk.
In a sense, the challenge to add generation capacity now has one more dimension—to keep the power bills down. And here, the government has frittered away an opportunity—one that would bring down the cost of power equipment, the second highest cost element in the electricity price.
They have failed to recognize the potential of the unprecedented pace of capacity addition that the country is witnessing, with a good part in the public sector. For, if they did so, they would have exercised buyer power of the sort China did in 1997 when it set up the Three Gorges project, the world’s largest hydroelectric project. For a share of the pie, besides an extremely competitive price, global suppliers such as GE, Alstom and Siemens had to offer technology transfer to Chinese firms for the machines they sold.
Until then, Chinese firms sold low-tech, low-capacity machines. Overnight, they nurtured predatory ambitions. The inroad into the Indian market is a result of this seeding: Chinese companies have today cornered half the orders in the country for high- tech boilers, a key component of coal-fired power plants.
Surely, this is to the detriment of domestic manufacturers such as Bhel and L&T. And, the power ministry had batted for them, seeking a raise in import tariffs, a move rightly dismissed by the finance ministry. Rather than secure the order books of domestic firms, power ministry should consider ways to aggregate the buyer potential of the domestic market and seek out suppliers, the Chinese and others. This is one incursion that is welcome.
What should India do to gain a corner of the power equipment market? Tell us at views@livemint.com
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First Published: Tue, Jul 26 2011. 01 24 AM IST