A quarter of the additional power generation capacity of 78,700 mw that India is projected to build in the 11th Five year Plan would run on Chinese equipment. The low cost of the Chinese machines?which are on an average 10% cheaper?is bringing down the cost to India?s major power companies as the presence of Chinese suppliers has led to increased competition among equipment makers.
To create 1mw of power generation capacity, India needs to invest around Rs 5 crore, which means that the investment in the current Plan would be to the tune of Rs 4 lakh crore. So, Chinese equipment supplies can result in substantial savings to India?s power generation companies. A part of this benefit could also be passed on to the consumers. Chinese suppliers have contracts in hands to implement power projects worth 18,500 mw, accounting for as much as 23% of the total capacity addition planned by the power ministry under the Plan. Meanwhile, power plants based on Chinese equipment are running without any technical problems. So who is scared of Chinese equipment suppliers?
The presence of Chinese suppliers, which entered the Indian market in 2004, has proved a catalyst for positive changes in the power equipment market and execution of projects. They brought down normal power project cost and also reduced the standard time for project execution. That has in turn helped in checking the upward pressure on electricity tariff here.
Before the entry of Chinese suppliers, the average per mw cost for coal-based power projects in India was in the range of Rs 4.5 crore. However, the same came down to Rs 3.5 crore after Chinese started bidding for power projects here. Similarly, Chinese competition also led to reduction in the normal time quoted by bidders for the implementation of power projects. It is not that Chinese contractors are competitive on cost only. Developers running power plants based on Chinese equipment testify that Chinese boilers and turbines are as good as Bhel equipment.
The Sagardighi power plant in West Bangal and the Yamunangar power plant, which are based on Chinese equipment, were commissioned in 2008 and are running successfully since then without any technical problem.
The Yamunanagar power plant of the Haryana Power Generation Corporation has two units of 300 mw each supplied by Shangahi Electric Corporation of China. The first and second units of the plant were commissioned in April and June of 2008. The utilisation rate of both the units this year was 90%, says the official supervising the operations of the plant.
?The installed Chinese boilers and turbines are as good as Bhel equipment,? S Bansal, chief engineer in charge of supervising the plant?s operations, told FE.
After completion of one year of operations, the developer successfully did overhaul of the first unit of the plant during May-June this year as per schedule. The scheduled overhaul of the second unit became due in November. However, the developer has still not done that because of delay in availability of spare parts from the contractor. However, he admitted that such problems are usually faced by new units.
West Bengal Power Development Corporation, the developer of similar-sized Sagardighi power plant, has no complaints about the technical robustness of the Chinese equipment at the plant. ?The performance of the equipment is excellent?, a senior official of the state utility told FE. The availability factor, an indicator of the plant?s technical readiness for operation, was 100%. ?The plant load factor (PLF) was low. But that?s because of low coal availability and not due to any technical failure of equipment,? he clarified.
While approving policy recently for bulk procurement of supercritical equipment by NTPC and Domodar Valley Corporation (DVC) for their envisaged power projects, the government has stipulated manufacturing facility in India as a pre-condition for bidding for these projects. That means Chinese suppliers cannot bid for these projects.
So the policy that was meant to encourage development of indigenous manufacturing capacity could end up limiting competition for the supply of supercritical equipment in India. If that happens, project cost and electricity tariff for these projects too would rise commensurately. Besides, it could also prove a major hurdle to technological upgradation in future. Those with domestic manufacturing capacity will not be exposed to competition from overseas players and so might not feel any pressure for keeping abreast with technological innovations.
Meanwhile, the ministry of home affairs? (MHA) recent move tightening visa conditions for Chinese workers has led to delay in power projects being developed by private players like Adani and Lanco. The first unit of the Adani?s Mundra power project was commissioned by the Chinese contractor. However, the commissioning of the second unit has been delayed because of non-availability of technical manpower. Chinese workers deployed by the contractor at the project have returned home after they failed to renew their visas.
Lanco?s Amarkantak project has been commissioned but the Chinese contractor is unable to conduct contractual performance guarantee tests because of non-availability of manpower. This has led to delay in determination of electricity tariff for the project. Tariff determination for the Sagardighi power project in West Bengal has also been delayed because of similar manpower shortage. Pending that, tariff for the plant has been fixed on a provisional basis.