According to minister of state for power Jairam Ramesh the proposed new policy will lay down domestic manufacture as a major pre-condition for all foreign power equipment manufacturers. In future, domestic manufacturing will be the yardstick for all foreign equipment suppliers. The policy directive will apply to all new projects, barring those for which orders have already been placed. We will soon get the Prime Ministers orders on this policy, Ramesh said.
The move is expected to hit Chinese equipment manufacturers the hardest and will be to the advantage of domestic equipment suppliers like state-owned Bharat Heavy Electricals Ltd and the private sector firm L&T.
Given the huge cost advantage, a sudden rush of orders have been placed with Chinese manufacturers by developers of various state and private sector power projects in India. It is estimated that Chinese equipment for around 18,000-20,000 mw will be supplied to Indian power projects in the next eight to ten years. The new policy will put a question mark over the future of such equipment supplies by the Chinese for power plants in India.
However, orders that have already been placed with Chinese manufacturers will not be affected. They include the 2,300-mw worth of equipment supplies600 mw each by Dongfang Electric and Shanghai Electric, and 1,097 mw by CMEC, all of Chinafor thermal power projects in 2008-09.
Dongfang Electric Co, which is Chinas largest power equipment supplier, is already in the process of setting up a manufacturing base in India. If its plans materialise, this would be the first manufacturing unit set up by a Chinese company in India.
Officials said the governments latest move is also a significant step towards reversing the recent slowdown witnessed in the growth of the capital goods sector. After expanding at 24.5% in November and 16.6% in December 2007, the capital goods sectors growth slumped to 2.1% in January 2008, the latest month for which figures are available.