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Rediff News  All News  » Business » Chinese firms join India's power sector

Chinese firms join India's power sector

April 10, 2008 09:38 IST
From zero presence in the Indian power equipment market a couple of years ago, Chinese companies are likely to supply as much as 30 per cent of the equipment required to meet the Eleventh Plan capacity addition target of 78,000 Mw.

Chinese companies are also bagging large orders from private power companies in India, despite the perception of "suspect quality".

Limited manufacturing capacity of the country's primary power equipment supplier, government-owned Bharat Heavy Electricals Ltd (Bhel), and price competitiveness are tilting the balance in favour of the Chinese.

"The Chinese companies are attractive because they have the capacities and are cost competitive," said KPMG Associate Director Santosh Kamath. Chinese equipment are 10 to 12 per cent cheaper than Bhel products.

In the power business, this is critical because low equipment costs enable power companies to put in lower bids for projects and raise their chances of winning them. Equipment costs make up almost 80 per cent of the cost of setting up a power plant.

China is able to offer lower costs because it leverages vast economies of scale. Dongfang Electric Corporation alone has a manufacturing capacity of 20,000 Mw, which is double that of Bhel's 10,000 Mw capacity.

"The capacity of Chinese companies ensures quicker delivery. They also have experience in supplying to power plants in China, which are performing well," said an  official with a private power company in India.

One power plant in India operating on equipment supplied by Chinese company Shanghai Electric is the 600-Mw Yamunanagar power plant near Delhi, 300 Mw of which was commissioned last year. "The plant is functioning without hitches," said an official.

Dongfang Electric Corporation is supplying equipment to West  Bengal Power Development Corporation's 600-Mw plant in Sagardighi and 300-Mw  plant in Durgapur. It is also supplying equipment to Lanco Infratech's 1,200-Mw Amarkantak thermal project in Madhya Pradesh, besides two other projects at Mangalore in Karnataka and Anpara in Uttar Pradesh.

Shandong Electric Power Construction Corporation has bagged the engineering, procurement and construction contract for Vedanta's 2,400-Mw plant at Jharsuguda in Orissa.

Orders have also been placed with other companies from Korea and Japan. Korean company Doosan has bagged the order to supply super-critical equipment, which is more efficient in burning of coal, to power utility NTPC's 2,000-Mw power plant at Sipat in Chhattisgarh.

Critics, however, say that Chinese power equipment have not yet been thoroughly proven. "It remains to be seen how these equipment function in Indian conditions. Cheaper equipment may turn out to be expensive later. That is a definite risk," another analyst added.

Chinese companies, however, reject the inferior quality argument saying their equipment have been successfully working all around the world. "It has been proven that our equipment are inferior to none," said a top official with a Chinese company based in India.

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Rakteem Katakey in New Delhi