Increased threat from Chinese competitors and signs that domestic policy support could wane sooner than expected seem to have forced public sector power equipment manufacturer Bhel to shape up. The company is planning to launch a new range of products that is not only in harmony with the policy intent to keep the carbon intensity of India?s growth regulated, but also designed to counter competition.
The new series includes equipment sets of 600 mw that could match up to Chinese sets of 660 mw, without any additional cost to buyers. The move is significant as Bhel, which enjoys a near-monopoly in the high-emitting subcritical power stations, was seen approaching a huge loss of business, thanks to the new policy bias for supercritical technology. Bhel is hopeful that its new 600 mw series would enable it to overcome environmental hurdles.
Sources said that the company has also introduced a new range of equipment with enhanced ratings in the subcritical category. Its 500 mw equipment has been upgraded to 525 mw and the 250 mw series to 270 mw. It has also introduced a new category of 150 mw machines needed for small power projects. The previous range of these subcritical equipment has eroded a large chunk of Bhel’s business in the past. Additionally, in the super-critical category, a new 700 mw series has been introduced. This series would give a tough competition to 660 mw machines from China, for which private power producers like Reliance Power has already entered into long-term supply contracts.
The government?s target is that 60% of fresh thermal capacities in the 12th Five-Year Plan and 100% in the 13th Plan would be of super-critical technology.
To the chagrin of Bhel, the Planning Commission has recently opined that power plants that were set up with Chinese gear have shown higher efficiency than those using Bhel?s equipment, and also expressed doubts about the PSU?s ability to set up new plants and adhere to committed supply schedules.
The influx of cheap but efficient Chinese equipment has affected the business of Bhel as a large portion of orders for the 11th and 12th Plans have gone to Chinese suppliers.
Chinese firms such as Dongfang Electric, Shanghai Electric and Harbin Power have also outbid Bhel to secure supply contracts from state power utilities and private companies. ?The new range of products has helped us to reduce the per mw cost of equipment and have fared well in the market vis-a-vis Chinese sets. It has also helped us get business from companies that had earlier given supply contracts,? said a top Bhel official. Companies such as India Bulls, Videocon, Monnet Ispat, Adhunik, Durgapur Power, Sona Power, Hindujas, Visa Power and Avantha have lapped up the new Bhel offerings, some of them terminating their earlier contracts with Chinese vendors.
Bhel has also decided to adopt flexible approach on the development of super-critical equipment, which are environment-friendly and more efficient. With an eye on the future, when use of these products will be mandatory, Bhel started a new equipment range of 700 MW in this range. This is additional to 660 mw and 800 mw sets that the company intends to supply to its customers in the coming months. Karnataka Power Corporation has already placed orders for 700 mw sets with Bhel and the company hopes to get more orders in this range from utilities. The new found vigour in Bhel comes in the backdrop of the criticism that the company virtually derailed the country’s ambitious capacity addition programme by delaying supplies. Both Planning Commission and the Power Ministry have said that Bhel’s under-performance was a key reason for the country’s inability to meet power capacity addition targets. Only 45,000 mw of the proposed 62,000 mw target for this Plan may be realised by March end 2012. ?Its good that Bhel has come out with some good products that will give serious challenge to Chinese companies. But to be successful, the company will also have to imbibe the Chinese model of shorter construction period that helps to to shorten delivery time,? said an official in the power ministry. Power experts, however feel that Bhel will certainly have an edge with a bit of supply discipline. ?The locally made equipment will be more suited to Indian conditions and conducive for Indian coal,? said Kuljit Singh, partner infrastructure practice at Ernst and Young. At present, Bhel has orders worth over Rs 1,60,000 crore. Government data suggest that out of 80,610 mw new capacity under construction in the 11th Plan (2007-12 ), about 43,048 mw (55%) would use Bhel’s machines and 15,725 mw (20%) would use that of Chinese manufacturers. For the 12th Plan (2012-17 ) period, of the 32,010 mw capacity already under construction, a substantial chunk of 10,170 mw (31%) would use Chinese equipment.
All major industrial groups like Reliance, Adani, JSW Energy , Jindal Power, KSK, GMR, Sterlite, Lanco, Indiabulls have placed orders from Chinese suppliers. ?Several joint ventures companies will soon start manufacturing power equipment in India. Bhel has to ensure that it is prepared for these changes,? said a government official. The government so far has refrained from imposing import duties on Chinese equipment as it could seriously jeopardise construction of several power projects.
A Planning Commission panel headed by its member Arun Maira had earlier suggested to load Chinese equipment import with duties to encourage foreign manufacturers to set up manufacturing base in the country rather than dump their products here. But, lately, the Commission in a report has lauded the performance of Chinese equipment suggesting that they function better.