The Association of Power Producers (APP), in a recent letter to Prime Minister Manmohan Singh, expressed its reservations regarding the government’s move to impose customs duty on imported power equipment. APP fears the move will have serious implications for the cost structures and tariffs, and delay projects. In a telephonic interview with P B Jayakumar, L&T Power Managing Director Ravi Uppal elaborates on the need to offer a level playing field for domestic power equipment manufacturers. Edited excerpts:
Is it rationale to ask power producers to depend on domestic manufacturers, as duties will negate their chances of sourcing cheaper power equipment?
Such a measure to protect the domestic industry is long overdue, as there is need to create a level playing field for domestic players. At the current exchange rate, the Chinese RMB is valued just 6.79 against dollar, and this is a huge advantage for the Chinese. This is the reason for our power producers to go after cheap Chinese equipment. We should note that already, about 33 per cent of the installed power capacity in India belongs to the Chinese, which is about 50,000 Mw. The sector was opened up in India only a few years ago and we are creating capacities in India. The government should consider this.
The power producers say earlier BHEL was the sole domestic manufacturer and there were frequent complaints of long waiting period for delivery. Isn’t it fair for those project developers to source equipment from available resources?
If we look at the past, the average capacity addition was about 3,000-4,000 Mw each year during the 10th Five Year Plan. This has become 20,000-22,000 Mw during this Five Year Plan, thanks to the huge addition, planned for this and the next Five Year Plan. In the sub-critical category, BHEL has achieved capability to match the Chinese prices. They have augmented capacity to 12,000 Mw and L&T has set up a 4,000 Mw facility, which we are increasing by another 2,000 Mw. Then there are upcoming joint ventures of companies like JSW, Bharat Forge and Thermax. These will take off within the next one-two years. Then why people are not ready to wait for another one-two years, as we will have a high quality domestic manufacturing capacity, with US, European and Japanese technologies?
Why players like L&T and BHEL are opposing the Chinese producers, as the choice is with the project developers?
I am ready to say that this blind support for Chinese or such cheaper technologies is against national interest. I will say most of these power producers, who never had a background in power generation, are blindly approaching the industry with a narrow short-term goal. I don’t want to name any power company or business house. You consider the life cycle of these equipment, which should be normally 30-35 years minimum. How many of these equipment will survive that period? If you are paying $100 now, you will have to shelve another $200 for its maintenance and management. Will these cheap producers provide proper after sales support and service? If all the leading European and Japanese companies have formed joint ventures in India, why the Chinese are unwilling to produce in India? If most of the state electricity boards and players like NTPC can rely on domestic manufacturers, why the independent power producers are reluctant to choose domestic players?
Do you think there are solutions to this, which are not against the interest of private power producers, who will invest only when they feel it is a profitable venture?
We are not asking for subsidies, we are asking only for a level playing field. Consider the one lakh plus job opportunities that will be created in India. Consider the demand for steel producers in India, who are exporting considerable amount of their produce currently. It is a case of national interest and development.
