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Business News/ Budget 2019 / News/  Central govt plans three power gear production zones
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Central govt plans three power gear production zones

The states will be selected on the basis of parameters such as manufacturing incentives and the price of land and electricity offered by them

The Centre has been urging companies and states to procure materials, equipment and technologies from within India, particularly in the strategic power sector, and for which India has sufficient domestic capacity. (Mint)Premium
The Centre has been urging companies and states to procure materials, equipment and technologies from within India, particularly in the strategic power sector, and for which India has sufficient domestic capacity. (Mint)

The government plans to set up three large manufacturing zones for power and clean energy equipment by offering companies incentives such as land and electricity at attractive prices, power and new and renewable energy minister Raj Kumar Singh said.

Building these zones is part of India’s campaign to encourage self-reliance and reduce dependence on Chinese power equipment. A list of equipment has been drawn up that the government wants to be manufactured in these zones—one each to be set up in a coastal state, a hill state and a land-locked state.

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The Centre has been urging companies and states to procure materials, equipment and technologies from within India, particularly in the strategic power sector, and for which India has sufficient domestic capacity.

“Any danger or threat to the power supply system can have catastrophic effects and has the potential to cripple the country. Therefore, power is a strategic and critical sector," the power ministry said in a July order.

These zones will have a minimum land area of 300 acres each and will be set up through a competitive challenge among states.

The states will be selected on the basis of parameters such as manufacturing incentives and the price of land and electricity offered by them. The Centre will set up common facilities requiring an investment of 500 crore each for these zones that are in addition to the government’s production-linked incentive (PLI) scheme.

“We have finalized this. We are preparing a cabinet note. We will be taking it to the cabinet for approval, and once it is approved, we will float the invitation for bids," Singh told Mint.

The move to set up dedicated manufacturing zones is primarily aimed at curbing the use of Chinese-made equipment and attracting firms across power generation, distribution and transmission —both in conventional and green energy spaces.

India imported $2.16 billion worth of solar photovoltaic (PV) cells, panels and modules in 2018-19. And of the 71,000 crore of power equipment imports in 2018-19 in the conventional power space, Chinese equipment accounted for nearly one-third or around 20,000 crore. The Centre is looking at enabling manufacturing all power sector equipment in India over the next three years.

“We’ve thought of setting up manufacturing zones for power equipment. We have drawn up a list of equipment that we want to target. That equipment includes those that are not made here, and also those made here but whose quantity is not sufficient for our demand. So, we have the list," Singh said.

Data from the Directorate General of Commercial Intelligence and Statistics shows that power sector equipment such as transmission line towers, conductors, industrial electronics, capacitors, transformers, cables and insulators and fittings are being imported, although they are all made in India. “The imports are sizeable. There is also a lot of electrical equipment imports," Singh said.

Once a state gets such a manufacturing zone, it will form a special purpose vehicle (SPV). Incentives offered by the states and other benefits such as adequate water supply and road and rail network accessibility in these zones will help cut production costs for firms that move in.

“We have made three groups of states; so, we will set up three manufacturing zones. And these zones will be set up on the basis of fair, transparent and open competition between the states," Singh said and added, “So, whosoever gets the maximum marks, the manufacturing zone shall be located there."

The power ministry is also working on operationalizing a list of approved manufacturers for government-supported schemes, including projects from where electricity distribution companies procure electricity for supply to their consumers. A similar approved list of modules and manufacturers exists for the clean energy sector.

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ABOUT THE AUTHOR
Utpal Bhaskar
"Utpal Bhaskar leads Mint's policy and economy coverage. He is part of Mint’s launch team, which he joined as a staff writer in 2006. Widely cited by authors and think-tanks, he has reported extensively on the intersection of India’s policy, polity and corporate space.
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Published: 15 Dec 2020, 06:23 AM IST
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