Ultra mega power projects

The government proposes to make it mandatory for bidders of ultra mega power projects (UMPPs) to source equipment from domestic suppliers. The move is aimed at reducing the dependence on foreign companies, particularly Chinese, and encourage a build-up of domestic supercritical technology equipment capacity.
Central Electricity Authority data reflect the UPA government’s concerns that Chinese companies hold sway over power equipment supplies in India. Of 43 supercritical units bought by Indian companies so far, orders for only four have been placed with Indian companies. Chinese companies have bagged orders for 26 boiler–turbine–generation sets (BTG). Koreans managed eight, while three went to Russian companies and two to Italian firms.
Tata Power has placed orders for five units of 800 mw each for the Mundra UMPP with Korea’s Doosan and Hitachi of Japan. Reliance Power has awarded contracts for six units of 660 mw Sasan UMPP to China’s Shanghai Electric. Equipment for Reliance Power’s Krishnapatnam and Tilaiya UMPPs are yet to be awarded.
Developers both in the state and private sectors have been moving from supercritical to sub-critical projects, causing concern. About 44,700 mw of supercritical capacity is under construction.
The power ministry proposes to revise bidding norms to make it mandatory for qualified bidders to buy equipment within the country. The plan to amend request for proposal would be put before the empowered group of ministers, headed by power minister Sushilkumar Shinde, that has been constituted to look into the UMPP issues, a senior government official said told Financial Chronicle.
Artificially pegged conversion rates for the yuan has given Chinese companies a distinct pricing advantage. “They have been able to quote 25 per cent lower because of the artificially determined exchange rates,” said an indigenous equipment supplier.
The centre will direct all state-owned power utilities to invite bids from equipment suppliers from Indian companies.
Power equipment makers like Bhel and Larsen & Toubro have welcomed the move, but electricity generators, including Tata Power and Lanco Power, said the move was the worst thing to happen to the power sector.
The state-owned Bhel said the step was in the right direction.
“We have always been saying that there is unfair competition with foreign players as there is zero per cent customs duty on imports. Some support is required at least till the time Indian supercritical equipment market is developed and is ready to take on competition. The government should facilitate manufacture of at least the first 10 or 15 supercritical sets,” Bhel chairman and managing director K Ravi Kumar said.
L&T Power managing director and chief executive officer Ravi Uppal said this was a step long overdue. “Companies like ours, Toshiba, and Bharat Forge are investing hundreds of crores in the sector. The proposal would help domestic players to grow and make the country self-reliant. We welcome foreign players to participate in Indian tenders as long as they set up shop in India,” he said.
However, Lanco Infratech chief financial officer J Suresh Kumar said the proposal would “lead to the market becoming anti-competitive, making Bhel a monopoly and subjecting generators to the whims and fancies of equipment suppliers.”
Tata Power finance director S Ramakrishnan said, “One has to look at the delivery schedules of domestic equipment makers”, implying that there were problems in supplies.
The government official said the power ministry was in favour of placing equipment orders with local equipment makers to help them establish more facilities and bring down costs.
The cost of initial supercritical units is high because of the large import content and low volume. Bhel is expanding its production capacity to 15,000 mw by the year- end. The company has tie-ups with Alstom and Siemens for manufacture of supercritical boilers and turbines. New joint ventures of L&T-Mitsubishi, JSW-Toshiba, Bharat Forge-Alstom and Ansaldo-GB Engineering are also setting up capacity.
Companies with domestic presence are at an advantage as they have qualified for bulk tenders to be floated by NTPC and DVC for 11 supercritical units. Only companies with a manufacturing base in India are qualified to bid for the contracts.