Private power cos oppose mandatory domestic equipment sourcing

They said that the move would lead to overall cost escalation and may favour only a few players

Private power producers have termed as "retrograde and anti-competition", the proposal for a mandatory domestic equipment sourcing clause, saying this will lead to overall cost escalation and may favour only a few players.

    

In a letter to the Finance Minister P Chidambaram, Association of Power Producers', a body representing the private power generation companies, have urged non-acceptance of the proposal.

     

According to sources, Ministry of Heavy Industries and Public Enterprises had mooted the proposal of mandatory domestic procurement of equipment for ultra mega power projects (UMPPs).

     

"We believe that in order to kick start the order book of Indian equipment manufacturers, an enabling environment needs to be created, but any action to impose mandatory domestic equipment sourcing is impractical and not in the interest of the country's power consumers," Ashok Khurana, Director General Association of Power Producers' (APP) said.

     

The private developers have said that the international equipment manufacturers are usually backed by their export credit agency financing, which enables Indian developers to take advantage of cost effective financing.

     

"Indian banks have almost breached their sectoral limits for lending to the power sector because of fuel issues and in this background there would be serious challenges in financing UMPPs without foreign financing," he said.

     

He added that mandatory procurement of domestic goods would make it very difficult to achieve financial closure.

     

At present there are some companies like Larsen & Toubro and JSW Energy, which are both into power generation and equipment manufacturing.

     

"The other companies fear that these two may have price advantage over them," sources said.

     

UMPP is an thermal power plant of minimum 4,000 MW capacity.