In a major boost to domestic power equipment manufacturers such as Bhel and L&T, the power ministry on Tuesday ?extended? the policy for local sourcing of supercritical equipment by central and state govt-owned power generating companies like NTPC and Andhra Pradesh Power Generation Companies for two more years.

The earlier policy lapsed in October 2012 and the government has since been mum on this. The policy will now remain in place till October 2015.

With the local-sourcing norm again in place, public sector generators will now have to incorporate this condition in any tender they issue over next two years for procurement of critical power plant equipment like boilers and turbines.

The ministry had earlier introduced the condition in February 2010 ahead of NTPC’s Rs 40,000-crore bulk tender for power equipment.

To take advantage of that, private players like L&T, Bharat Forge, JSW Energy, Thermax and BGR Energy set up manufacturing facility in partnership with global suppliers.

But the policy expired in October 2012.

?The matter ( incorporating condition of setting up phased indigenous manufacturing facility in bids for procurement of power equipment) has been considered by the power ministry and it has been decided that the advisory be extended for another two years till October 2015,? the Central Electricity Authority has written to public sector utilities, advising them to follow this procurement policy.

Significantly, this comes at a time when fresh orders for power equipment from private players have dried up and demand from state-owned generators remains the only hope for domestic manufacturers.

Lack of fresh orders impacted power equipment manufacturers’ topline and bottomline in the April-June 2013 quarter.

For example, Bhel’s net profit halved during the period while net sales dropped by 23%.

Its order book shrunk by 6% in the quarter. To revive order flows for domestic power equipment suppliers, the ministry of heavy industry industries suggested to make it mandatory for ultra mega power projects to source their equipment locally.