India power equipment tenders discriminate against Chinese equipment manufacturers
May 27, 2010

Indian power equipment companies, already strained to supply power to sweltering Indian cities have once again begun screening against Chinese power equipment manufacturers. In the last week itself, State-run Power Grid Corp of India Ltd and National Thermal Power Corporation which just released a US$4.2 billion tender have both requested for equipment to be sourced only from domestic vendors.

Indian officials maintain that it wants to protect domestic manufacturers and that Chinese equipment quality is inferior, emits more pollution and isn’t fuel-efficient. Since the past year, Indian power equipment makers such as Bharat Heavy Electricals Ltd (Bhel) and Larsen and Toubro Ltd (L&T) have lobbied against cheaper imports from China which are continuously subsidized by Beijing. Shanghai Electric Group Co. Ltd, Dongfang Electric Corp., Shandong Electric Power Construction Corp. (Sepco) and Harbin Power Equipment Co. Ltd already supply a majority of India’s requirements to Indian power companies. The new restriction comes just when China and India had resolved similar issues the two countries faced over telecom equipment.

While Indian companies have been lobbying for an import duty on Chinese power equipment and a regulation that the Chinese manufacture their equipment in India, New Delhi has been dragging its feet on the issue. If implemented, prices of power equipment will soar at a time when private Indian players such as Reliance ADAG, Adani and Jindal rely heavily on cheaper chinese equipment.

Since outright restrictions will increase tensions between India and China, India is weeding out Chinese power equipment manufacturers on the basis of the plant efficiencies. Indian tenders are now mostly for supercritical equipment. Supercritical equipment works on lower heat rates thereby consuming less coal leading to higher efficiencies and lower emissions, helping India reduce its carbon emissions.

A new regulation in the making for supercritical equipment requires all Indian power equipment manufacturers for 660MW unit size project to procure equipment with a heat rate less than 1,850 kcal/kWh. While the equipment of Dongfang Electric Corp. Ltd and Shanghai Electric have heat rates of 1,920 kcal/kWh, heat rate of Shandong Electric Power Construction Corp. (Sepco) equipment is 1,860 kcal/kWh. Thereby automatically eliminating Chinese equipment from applying for the tender. Chinese power equipment manufacturers can now only supply equipment for 1,000MW unit size projects.

India has a power generation capacity of 153,000MW and expects to add an additional 62,000MW by 2012. Of this, orders for 42,431.58MW of capacity have been placed with Bharat Heavy Electricals Ltd (Bhel), the country’s largest power equipment maker, which has a current annual capacity of 10,000MW. In order to meet the high demand at lower costs Chinese power companies are supplying a third of the 62,000 mega-watts of power capacity New Delhi planned to add to the country’s generation from 2007 to 2012 by delivering a plant in record time and at 20 per cent less cost than competitors. India plans to set up an additional power generation capacity of 100,000MW during the 12th Plan, which will run from 2012-17.


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