Indian Power Manufacturing Protection Mooted as Orders Dwindle

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--Mixed messages are coming from the Indian power generation and power equipment manufacturing sectors.

The Indian government has proposed a measure to make it compulsory for developers of ultra mega power projects (UMPPs) to use locally manufactured equipment. But the Association of Power Producers sent a letter to Finance Minister Pranab Mukherjee that stated that domestic manufacturers were already overburdened with existing orders and were not in a position to meet the demand of the project developers.

The letter continued, "Indian producers have lacked the capacity to supply power plant equipment at desired schedules. Import of equipment for power projects has been a major contributor in capacity addition in the current (five year) plan period. In the absence of competition to the domestic power equipment manufacturing sector, there will be a likelihood of price hikes and supply timelines reverting to 60 months as has been witnessed in the past."

The proposal to protect local manufacturers comes at a time when orders for new equipment are down. Only $1.9 billion in orders has been booked over the past 10 months. In the previous fiscal year, state-owned Bharat Heavy Electricals Limited (BSE:500103) (BHEL) (New Delhi alone booked 8,921 megawatts (MW) of orders worth $7.2 billion in the April through December period.

Ramesh Chandak, the president of the Indian Electrical and Electronics Manufacturers Association (IEEMA), said that manufacturing facilities of electrical equipment such as transformers, transmission lines, switchgears, conductors and cables were producing at about half of their capacities. The industry consists mainly of small and medium companies, with growth this year slowing to 4% after reaching 14% last year.

The project pipeline has been slowed by a number of factors, including coal shortages, slow approvals, the absence of distribution reforms, environmental clearance problems, and land and water availability. Customers are also switching from subcritical to supercritical technology and are waiting for funding. It is estimated that about 34,000 MW of new generating capacity has been stuck in the project pipeline for the past 18 months.

On the brighter side, NTPC Limited (BSE:532555) (New Delhi) is now able to place at least $3.2 billion of equipment orders after the country's Supreme Court upheld NTPC's appeal against the March 2011 ruling by the Delhi High Court to allow Ansaldo Caldale Boilers India (Chennai, India) to participate in priced bidding for supercritical boilers. NTPC claimed that the company did not satisfy the tender condition in respect of qualification. With this matter now out of the way, NTPC can move ahead with the order-placing process for 11 supercritical boilers and 11 660-MW supercritical turbines for five power plant projects.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.