NTPC plans JV for plant components

NTPC, India's biggest power producer, is in negotiations with Bharat Forge to set up a joint venture to produce components for power plants.

"There is a shortage of good quality forgings and pipes for the power industry in India and we want to meet the growing demand,'' NTPC Chairman T Sankaralingam said in a interview. "We are in talks with Bharat Forge. The decision depends on our board of directors."

Demand for power-plant equipment has surged with Prime Minister Manmohan Singh's government set to make huge investments in the next five years on boosting generation capacity and upgrading the transmission network.

"Backward integration through the forgings venture can help NTPC increase its revenue by up to Rs 500 crore ($126 million) according to our estimate," said K D Mehru, vice-president at Mumbai-based stock brokerage Darashaw & Co. "The market needs all the equipment it can get."

Sankaralingam said the state-run company has informed the power ministry of its plans to enter the business. He didn't say how much the company plans to invest in the venture.

NTPC, which produces 28,334 mw of power, plans to raise its output to 51,000 mw in the next five years. The company, on October 9, formed a joint venture with power equipment maker Bharat Heavy Electricals to build power projects and help reduce component shortages.

The government estimates peg a two percentage-point loss in annual growth to electricity shortages and plans to add 78,577 mw by 2012 to help beat peak hour shortages of up to 13 per cent.