In a radical step, the government is considering banning Bharat Heavy Electricals Ltd (Bhel), India’s leading state-owned power generation equipment manufacturer, from bidding on some new power projects.
The move will likely open the door for foreign players, such as Alstom and Siemens, to go after some of the new power projects that are coming up for bids.
The proposal stems from the government believing that Bhel won’t have the production capacity to meet the projected demand of 68,870 Megawatts over the next five years. said a senior government official who didn’t want to be named.
Bhel’s current backlog from the power sector stands at 20,000MW. It has a equipment manufacturing capacity of 7,500MW per year, and wants to ramp up capacity to to 15,000MW per year by 2009.
Bhel officials disagreed with the government’s thinking. “Siemens and Alstom are already booked for the next four years. Any new capacity can only come up in two and a half years if a company like us augments capacity. For a new player it will take around four years to do so,” said a senior Bhel executive who didn’t want to be quoted.
But anticipating this, the government is looking to offer incentives to foreign manufacturers and guaranteeing orders worth 10,000MW to any company that is willing to establish local manufacturing facilities, said this official.
Additionally, “there is a need to create a new enterprise, with government participation if necessary, to deliver this capacity,” the official said.
The government’s thinking is being driven by the fact that India fell nearly 50% short of 10th Plan (2002-07) targets. By December 2006, the additonal power capacity was only 17,995MW against a target of 41,110MW. India has a present power generation capacity of 128,000 MW and the total capacity addition at the end of this plan is likely to be around 23,000 MW.
The delays have also been attributed to Bhel’s inability to tie-up technology for supplying six units of 660MW to be taken up by NTPC.