India's Ministry of Power to Expand Power Equipment Manufacturing Base

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Researched by Industrial Info Resources (Sugar Land, Texas)--In order to avoid a repeat fiasco of unattained power targets in the Eleventh Five-Year Plan (2007-12), India's Ministry of Power has been scouting for global players to set up manufacturing facilities for boilers, turbines and power generation equipment. The ministry is looking to achieve an addition of 78,577 megawatts (MW) in the period and is taking measures to prevent slippages that have plagued its growth targets during the last three planning periods.

In the Tenth Five-Year Plan (2002-07), India added only 20,950 MW of generating capacity against a set target of 41,110 MW. In recent communication to the prime minister, the ministry attributed this slippage to delays in awarding contracts and subsequent hold-ups in equipment supply and construction by suppliers and contracts. The ministry is also focused on augmenting domestic manufacturing capacity of balance of plants, such as coal-handling plants, ash-handling plants and water-handling units. There is a scarcity of vendors for balance of plants, and quotations are often received from a single vendor in response to contracts. The ministry is evaluating the feasibility of awarding these contracts as a complete package instead of dividing responsibility among several vendors for equipment, civil contracts and erection.

Several companies, including Toshiba Corporation (OTC:TOSBF) (Minato, Tokyo), Skoda Power A.S. (Plzen, Czech Republic), BWE Power International Company Limited (Tianjin, China), Ansaldo Energia (Genoa, Italy) and Alstom (EPA:ALO) (Levallois-Perret, France), have expressed interest in setting up manufacturing units for power equipment in India. Bharat Heavy Electricals Limited (BHEL) (BOM:500103) (Mumbai) and National Thermal Power Corporation (New Delhi) will jointly set up a manufacturing unit with a capacity of 4,000 MW. This is likely to be commissioned by 2012.

BHEL will ramp up its turbine manufacturing capability from the current 10,000 MW per year to 15,000 MW per year by 2011. Larsen & Toubro (L&T) (BOM:500510) (Mumbai) and Mitsubishi Heavy Industries (TYO:7011) (Tokyo, Japan) have also joined hands to widen India's manufacturing base. L&T is developing a power equipment manufacturing facility with an annual capacity of 4,000 MW in Hazira, Gujarat.

The ministry's recent proposal to enforce the presence of a manufacturing base in the country as a mandatory requirement for international equipment suppliers to upcoming power units has met with vehement opposition from the industry. The proposal was aimed at containing large-scale imports of power equipment from China, but industry experts have pointed out that such a move would place ongoing projects behind schedule, since setting up a manufacturing facility would require at least three years.

Investments required for growth of the power sector in the ongoing plan period are estimated to be $250 billion. Power plants with an aggregate capacity of 9,698 MW have already been commissioned. Additional projects of a total capacity of 67,312 MW are under construction and are likely to become operational by the end of this period. A proposed ultra-mega-power project in Sasan, Madhya Pradesh, is also expected to take off soon, and equipment orders for a capacity of 1,320 MW in this project may be placed within the next six months. The project has currently been shelved because of the scarcity of gas. The ministry is also buoyed by investments from the private sector. Independent power projects of 16,363 MW and captive power plants of 11,000 MW are also slated to be commissioned by the end of the Eleventh Five-Year Plan. Equipment orders have been placed for 71,000 MW. Given India's ambitious power plans, this number is slated to be 25,000 MW to 30,000 MW per year.

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