Alternatives to BHEL’s Capacity Constraints

The future requirements of power for India to sustain and improve on the GDP growth are huge. According to the Planning Commission’s Integrated Energy Policy (IEP), even if India is to grow at a sustained 8% for the next 25 years, it must ramp up electricity generation from 1,60,000 MW to 8,00, 000MW. The more ambitious ones can calculate the multiplying factor if they wish a higher growth rate. Generation will add all sorts of power plants: hydel, gas, coal, nuclear. Naturally it will demand the power equipment sector to grow accordingly with annual capacity ranging between 30,000- 40,000 MW. China’s power equipment industry today has excess capacity capable of producing 35,000-40,000 MW of power

Solutions are obviously three. While BHEL must multiply its manufacturing capacity, India will certainly need more than one big manufacturer. Big enterprises must come out for manufacturing for power plant equipment. It may be in public as well as private sector. And the sooner they come, the better it will be for India. Import of equipment may also be one another solution, but it doesn’t build the manufacturing strength of the country that is essential when the domestic consumption is that huge. These future power equipment plants can compete and export too to the other emerging economy.

The power ministry of India is trying to bring in NTPC for manufacturing the power equipment too. However, it may be a shellfish move of the ministry, and it can’t be considered a technically prudent idea. NTPC must keep on setting up the power plants according to its plan of more than doubling its capacity in the next 10 years to 66,000 MW or more. It may enter the coal mining and nuclear power sectors. But manufacturing is not the core competence of NTPC. It can certainly go for the outsourcing business of setting power plants in other countries too.

As many private enterprises are entering power business beside Tata Power and Reliance Energy, few more equipment manufacturers must also get into the business.

Private Power Plant Equipment Manufacturers

Among the private sector power equipment manufacturers, Alstom India could have been of help but it is hesitant to add to its capacity and technology to meet the country’s need. Private sectors could supply equipment for just 7,000 MW in last plan period against the expectation of 14,000 MW.

The foreign equipment majors that have supercritical technology are not ready to set up a manufacturing facility in India without assured order. Larsen & Toubro (L&T) has tied to manufacture supercritical boilers in the company’s Hazira plant in collaboration with Japan’s Mitsubishi, one of the world’s leading manufacturers of supercritical boilers. The venture will invest about Rs 750 crore to set up a facility in India. But even L&T wants government protection. The L&T-Mitsubishi combine is asking the government to award it eight supercritical units without competitive bidding. The government must not restrict the power equipment sourcing for the plants of states and centre to BHEL, its public sector giant.

L&T has recently signed two joint ventures, one each with Mitsubishi and Toshiba, to produce supercritical boilers and turbines. L&T’s JV with Mitsubishi Heavy Industries is expected to start manufacturing boilers by the second half of 2008-09. The company will manufacture under license from MHIL for supercritical pressure boiler technology with generating capacities ranging between 500 and 1,000 mw. The JV will entail a capital investment of Rs 300 crore – MHI owning 49 per cent and L&T 51 percent.

It is but sure that L&T venture or any new venture will take time to be major power equipment supplier in competition with BHEL to make any significant impact on the overall shortage in power generating equipment. Setting up a manufacturing facility takes three to five years.

Another alternative will be to increase the import of power generation equipment from countries such as Japan, Germany, the United States, France and China, particularly since there is no import duty. China may appear to be an attractive place to shop with company such as Dongfang Electric, about 10 per cent cheaper than those in Europe and India, but the quality of design may be suspect and must be ascertained. Tata Power has tied up with South Korea’s Doosan to set up its mega power project at Mundra in Gujarat.

However, the country must go for its own manufacturing of power eqipment. Powering India provides a great opportunity to the entrepreneurs who are in manufacturing of electric equipment. Many of the smaller players such as Kirloskar Electric or Crompton Greaves must get into the sector.

I do also suggest that our IITs must not abandon and abolish these traditional engineering departments and work hard to keep the cutting edge researches going on in these fields.