India has the potential to become a global manufacturing hub for power equipment. However, to realise that potential, it needs to ensure easy and timely availability of critical materials for power equipment manufacturers. The government has envisaged ambitious capacity addition in the power sector over coming years. This can be leveraged to develop supply chain for the domestic power equipment industry.
To ease the availability of power equipment, the government is focusing on developing domestic manufacturing capacity.
With private players setting up facilities for producing supercritical equipment to benefit from the government?s policy, India?s power equipment manufacturing capacity is expected to increase significantly. This presents an opportunity for India to address the chronic supply chain constraints hurting the competitiveness of the power industry.
Domestic power equipment manufacturers like Bhel suffer a price disadvantage vis-a-vis Chinese suppliers in India as the supply chain for the power equipment industry in China is well developed. That has forced domestic manufacturers to seek a customs duty imposition on imported power equipment.
Electricity tariff is already on the rise because of the increase in fuel costs. If the customs duty on power equipment is hiked sharply, it would add fuel to fire.
While the government has taken note of the disadvantages faced by the domestic power equipment industry vis-a-vis Chinese suppliers, it is unable to comply with the industry?s demand for imposing a 14% import duty. Instead, a modest 4% increase in the import duty is under consideration. This would hardly give any relief to the power equipment makers against the onslaught of Chinese imports.
If the domestic supply chain were well-developed, the Indian power equipment industry would not be so helpless against Chinese import.
With the country envisaging an ambitious power capacity addition target in the coming years, this is the right time for the government to focus on filling the gaps in the supply chain for the power equipment industry.
Domestic steel makers like SAIL and Bharat Forge have announced plans to set up manufacturing facilities for tubes, pipings and specialty steel for use in supercritical power equipment production. The government needs to encourage other steel manufacturers to develop similar facilities.
?This is exactly the opportunity for India to develop supply chain for the power equipment manufacturing industry,? says Guy Chardon, senior vice-president for Alstom?s thermal product business.
The government?s supercritical power equipment policy has encouraged private players to set up manufacturing capacities in India. However, that would not go far enough to improving the delivery of power equipment and bringing down manufacturing costs if constraints of material supplies remain unaddressed.
While the country?s power equipment manufacturing capacity should go up significantly over the coming years, the timely availability of critical materials like tubes, pipings, forgings and castings and specialty steel for manufacturers remains a big concern and could well defeat the main objective of the government?s supercritical policy.
The government has done the right thing by formulating a supercritical policy. Now it should focus on developing a supply chain for the power equipment industry.