New Delhi: In what will help revive demand in the Indian capital goods sector, state-owned NTPC Ltd plans to place orders worth around 8,340 crore with power generation equipment makers in March.

Orders for power equipment have dried up because of a combination of slowing economic growth, high borrowing costs and delays in securing regulatory approvals. In fact, no private manufacturer received any orders for equipment in fiscal 2013.

Cash-rich NTPC now plans to place orders for boilers for the 1,600 megawatts (MW) Darlipali project to state-owned Bharat Heavy Electricals Ltd (Bhel), while the orders for the additional 1,320 MW at 440 MW Tanda project in Uttar Pradesh will be given to the joint venture (JV) between Larsen and Toubro Ltd (L&T) and Mitsubishi Heavy Industries Ltd. And, the steam turbine and generator order for the Tanda project is to be awarded to the JV between Alstom SA of France and Bharat Forge Ltd.

“All these orders will be placed in the current fiscal," said a NTPC executive requesting anonymity. The company had cash reserves of 16,867.70 crore as on 31 March.

These orders are part of the bulk orders floated by NTPC wherein bidders were short-listed but contracts couldn’t be awarded due to an ongoing lawsuit, land acquisition issues and the lack of coal linkages to fuel its projects. These bulk tenders were for nine units of 800MW each and for the supply of 11 boilers and 11 turbines of 660MW each. The resolution of issues has cleared the deck for NTPC to go ahead.

Last week, NTPC placed its largest order till date for the engineering, procurement and construction (EPC) of its 1,980 MW North Karanpura project in Jharkhand with Bhel—the order is valued at 7,900 crore. Earlier India’s largest power generation utility awarded the orders for steam turbine and generators for its 1,600 MW Darlipali project to Toshiba JSW Power Systems Pvt. Ltd.

While queries emailed to a NTPC spokesperson on Sunday evening remained unanswered till press time, B. Prasada Rao, chairman and managing director of Bhel said, “This (North Karanpura) is the largest such order received by Bhel. We are hopeful that the policy interventions will bring some demand back to the sector."

No private sector power equipment maker has received orders in 2012-13. India’s power generation equipment manufacturing space has a capacity of around 30,000MW, with an equal share of boiler and turbine generator sets.

While spokespersons for L&T and Alstom SA declined to comment, queries emailed to the spokespersons of Bhel and Bharat Forge on Sunday evening also remained unanswered. Toshiba Corp.’s president and chief executive officer, Hisao Tanaka who was in Delhi last month said that he was hopeful about the growth in the Indian power generation equipment space.

Toshiba plans to invest $500 million in India by 2017 and create 5,000 jobs.

Of India’s current capacity of 233,930MW, NTPC accounts for 18.14% with an installed power generation capacity of 42,454 MW. The utility plans to add 14,038MW during the 12th Plan period (2012-17) and has budgeted capital expenditure of 1.5 trillion. It has set up a target of becoming a 128,000MW power producer by the year 2032.

Other Indian power generation equipment manufacturers are Doosan Heavy Industries and Construction Co. Ltd, and joint ventures between Ansaldo Caldaie SpA of Italy and Gammon India Ltd; BGR Energy Systems Ltd and Hitachi Power Europe GmbH; and Thermax Ltd and Babcock and Wilcox Co.

“The industrial sector has been facing slowdown over the last 20-24 months. Power sector has been facing multitude of challenges—fuel shortage, financial health of distribution companies, delay in land acquisition, and environmental clearances among others. This has lead to the slow pace of project execution resulting in low demand and order booking of capital equipment," said Amol Kotwal, associate director, energy and power systems practice for South Asia and the Middle East at consulting firm Frost and Sullivan.

Power project developers have also been struggling with interlinked issues such delays in signing long-term power purchase agreements. This has made private sector manufacturers taking a haircut and offer discounts for power generation equipment.

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