New Delhi: India is considering expanding its capacity to manufacture power generation equipment to meet the country’s growing requirements and address concerns about imported equipment, particularly from China.
The Planning Commission, the country’s apex planning body, is conducting a study on how to fine-tune the process of increasing domestic production capability without putting pressure on project timelines.
“When we need more power equipment and there is domestic demand, why don’t we produce our own,” said Arun Maira, the Planning Commission member who is preparing the report.
“The government would also look at the pros and cons of different sources of equipment, keeping in mind the need to meet current demand while also trying to increase domestic production,” he added.
The commission was given this responsibility about a month ago, and is expected to submit its report by the end of January, a top government official said on condition of anonymity.
It will look into the debate of foreign versus domestic competition, which has been raging for some time now. The official said Chinese-supplied equipment had been particularly problematic, prompting the government to commission the study.
India has a power generation capacity of 153,000MW and expects to add an additional 62,000MW by 2012. Of these, orders for a capacity of 42,431.58MW have been placed with Bharat Heavy Electricals Ltd (Bhel), the country’s largest power equipment maker, which has a current annual capacity of 10,000 MW.
“This capacity is not sufficient, given the huge demand for power in the country,” said Union power secretary H.S. Brahma. “We are expecting a demand of around 700,000MW in the next 30 years.”
Indian power generating firms have placed orders for equipment to generate 26,000MW with Chinese firms such as Shanghai Electric Group Co. Ltd, Dongfang Electric Corp. and Harbin Power Equipment Co. Ltd, largely because of the inability of local manufacturers to meet growing demand.
These companies are also sitting on so-called letters of intent from Indian firms for equipment to the tune of 25,000MW. Chinese equipment is also relatively inexpensive and readily available.
Equipment makers, much like other exporters from China, benefit from low interest rates and an undervalued currency to boost exports. China exported $31.33 billion (Rs1.46 trillion today) of goods to India in 2008-09.
But India’s apex power sector planning body—the Central Electricity Authority, or CEA—has raised concerns about the quality of Chinese equipment. Questions emailed to the Chinese embassy in New Delhi remained unanswered at the time of filing this report.
The commission is seeking inputs from relevant ministries such as the power ministry, the commerce ministry, the ministry of heavy industries, the Department of Industrial Policy and Promotion as well as the finance ministry for the report.
“From the demand side, for the sake of local capacity, we shouldn’t delay (projects),” said Maria. “Companies such as Bhel have established track records but don’t have a large enough scale. Neither do we want to put all our eggs in one basket. If taxes seem to be high and therefore a handicap, then one has to keep looking at that also.”
Mint had reported on 26 October about CEA recommending the waiving of import duty on machinery that will be used to make supercritical power generation equipment. Such equipment, having a capacity of 660MW and above, helps in higher plant efficiencies and economies of scale, besides being environment-friendly.
But Hitul Gutka, an analyst at the Mumbai-based India Infoline Ltd, said imports of Chinese equipment could not be stopped. “It is the future. If we are planning to add large capacity expansion in the country, one needs to develop domestic manufacturing,” he said. “Providing tax sops will incentivize international players to set up capacities in India.”