Chinese power firms yet to pose a threat

The increasing presence of Chinese equipment in India's new power plants is not a cause of worry as there is enough demand, power equipment manufacturers say.

The 11th five-year Plan aims to add over 78,000 Mw capacity by 2012. The largest equipment supplier, the government-owned Bharat Heavy Electricals Limited (BHEL), has its hands full. This has paved the way for other equipment suppliers from around the world, especially the Chinese, to step in.

"The Chinese power equipment is cheap and the delivery time is less," says a senior member of the Indian Electrical & Electronics Manufacturers' Association (IEEMA). The Chinese equipment is 10-20 per cent cheaper than BHEL's.

In the past few years, Chinese players like Dongfang Electric, Shanghai Electric and Harbin Power have won orders for supplying BTG (boiler, turbine and generator) equipment at around 20 per cent lower prices than BHEL.

Besides, BHEL is not able to stick to the delivery schedule, says an official of the Uttar Pradesh Power Corporation. He cites example of the 2,000-Mw Paricha thermal power plant, which has been delayed for over a year as BHEL couldn't supply the equipment on time.

There is a huge demand for power equipment and BHEL's order book is full. "There is clearly scope for more players," says Arvind Mahajan, associate director at KPMG.

Those who have placed orders for Chinese equipment include Vedanta, Reliance Power Limited (RPL), JSW Energy and state utilities in Chhattisgarh, West Bengal and Haryana. There is, however, a general tendency among state-owned utilities to award orders to BHEL to avoid the long competitive bidding process. This lets them place the order on a "negotiated basis." In fact, all plants of government-owned NTPC, which is the largest power generator in the country, have been supplied by BHEL.

"NTPC is not keen on Chinese equipment," says an NTPC official, citing quality issues. This can be gauged from the fact that despite competition from Russian, Korean and Chinese companies, BHEL has not lost a single 500 Mw unit to competition so far.

The interesting play in the market will now be for supercritical, high-capacity and high-efficiency units, used in plants with a capacity of 660 Mw and more. According to the Central Electricity Authority (CEA), the share of supercritical projects in India's coal-based capacity addition is likely to rise from 17 per cent in the 11th Plan to 71 per cent in the 12th Plan. BHEL is yet to bag its first order for a supercritical unit although it has the necessary technology tie-ups in place.

China is also aggressively adding capacity to meet its own demand. "When their domestic market is saturated and they start dumping in India will be the time to worry. That time is still a few years away," said the IEEMA official.