The government would take a stricter stand against high-emitting sub-critical thermal power stations. The power ministry and the Planning Commission are mulling a new policy regime that would discourage new proposals for sub-critical stations by denying them fuel linkages. ?Sub-critical stations would be deprived of all forms of policy support,? a senior functionary in the Commission told FE.
In the new regime, even if a firm planning a sub-critical plant opted to have captive coal mine in the absence of coal linkage, it would have to face an unfriendly government machinery. ?Environmental clearance would not be forthcoming for plant sizes below 660 mw, the threshold for the carbon-efficient super-critical technology,? said the source.
The idea is to augment the availability of super-critical equipment in the domestic market at affordable rates and thereby encourage the setting up of more high-capacity thermal stations that can help manage the carbon intensity of India?s GDP.
The extant policy also prefers super-critical plants that consume 3% less coal, but many equipment-makers, including public sector Bhel, refuse to abandon the sub-critical technology they are conversant with.
The new policy would have serious implications for Bhel. While the PSU enjoys a near-monopoly in the domestic sub-critical power equipment market, it will have to face tough competition from private players like L&T, JSW, Bharat Forge and GE in the area of supercritical plants.
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 supercritical technology. However, the policy managers are worried that the interest of many equipment-makers in sub-critical plants has not waned. They reckon that unless all policy supports for such plants are withdrawn, it would be difficult to meet the Plan targets. Also, it is felt that a major expansion of the domestic manufacturing base for super-critical technology is imperative for reducing prices.
According to the current policy, plants of 1,000 mw and above get fiscal sops like import duty waiver and income tax relief. That apart, it is mandatory for any equipment supplier bidding in the bulk tenders of public sector NTPC and Damodar Valley Corporation to have a domestic manufacturing base for super-critical equipment. Super-critical power plants are also entitled to carbon credits in India.
Super-critical power equipment normally comes in the standard unit size of 660 mw and 800 mw. L&T, in joint venture with Mitsubishi Heavy Industries (MHI), is setting up a facility in India for manufacturing 4,000 mw super-critical boilers as well as turbine-generators (TG). The consortium of Bharat Forge and Alstom is putting up a capacity for manufacturing super-critical TG sets of 5,000 mw. JSW and Japan?s Toshiba are together developing indigenous facility for 3,000 mw of TG sets while GE Engg-Ansaldo JV is coming up with 2,000-mw boiler manufacturing facility.
Bhel?s margins from sub-critical power equipment are normally in the range of 14-15%. L&T has said it will be targeting Ebidta margin of 13% only from super-critical power equipment business. That means downward pressure on Bhel?s margins.
What does not augur well for Bhel is that it has lost the bids for supplying super-critical equipment to mega projects like APgenco?s 2X800 mw Krihsnapatnam and Mahagenco?s 3X660 mw Koradi power projects. Bhel will benefit from the government?s policy of bulk ordering super-critical equipment for the first 11 units of NTPC and DVC. However, this will be a one-off thing. Moreover, it will have to share orders with private suppliers like L&T and JSW even if it emerges a winner in the tendering race. The company does not seem to have factored in the possibility of a phase-out of sub-critical power generation technology in the foreseeable future. In a recent investors? conference, Bhel chairman BP Rao said the company?s margins would not be materially affected as super-critical equipment would account for only a small part of its business.