New Delhi: At least three overseas companies—the US-based General Electric Co. (GE), Japan’s Mitsubishi Heavy Industries Ltd and Spain’s Union Fenosa SA—are keen on setting up factories to make power equipment at an industrial area that the Madhya Pradesh government proposes to develop at a cost of Rs30,000 crore.
“We are in talks with a lot of players. These include Mitsubishi Heavy Industries, Union Fenosa and GE,” said an executive at Infrastructure Leasing and Financial Services Ltd, or IL&FS. IL&FS is assisting the state develop the area at Raigarh, which will have an annual capacity to manufacture equipment to generate 30,000MW of electricity.
“The land has already been identified and we expect companies setting up power generation manufacturing facilities for thermal, solar, hydro and even nuclear to show interest,” the official said, requesting anonymity. India permits 100% foreign direct investment in the power sector.
“It (the industrial area) will also have equipment manufacturing (units) for capacitors, transformers, switch gear, control systems and disconnecters. The manufacturing set-up will have the potential to export to other countries as well,” the executive said. State government officials couldn’t be reached for comment.
While a Union Fenosa spokesperson declined to comment, a GE spokesperson said in an email, “GE doesn’t respond to market rumours or speculation. India is a critical growth market for GE. We are committed to growing our business in the country and are constantly evaluating opportunities to strengthen our presence in the market.”
Mint had reported on 12 April 2007 and 2 July 2008 about GE’s plans to set up a steam turbine manufacturing facility in the country and Union Fenosa’s moves to enter the domestic power generation sector, respectively. Queries emailed to Mitsubishi Heavy Industries went unanswered.
Power sector analysts say the real challenge for these foreign firms would be to ensure cost competitiveness and economies of scale. “When foreign equipment manufacturing companies set up shop in India, it will be good for project developers as equipment procurement is still a concern here,” said Arvind Mahajan, executive director at audit firm KPMG India.
In the five years to 2007, India missed its target to add capacity by almost 49% and experts say unavailability of power generation equipment was a major reason for this. Currently, state-owned Bharat Heavy Electricals Ltd, or Bhel, has a near-monopoly in the domestic equipment space, with a 60% market share.
On competition from foreign overseas players, Bhel chairman and managing director Ravi Kumar said, “We do not think there will be much of a challenge, as by the time they start manufacturing, our new facilities will already be depreciated.”