Delay in implementation of power projects is threatening the profitability of domestic equipment manufacturers who are already facing stiff competition from Chinese firms.
Equipment tenders for at least 20 projects, with aggregate generation capacity of about 34,000 mw, have been stuck for over a year due to uncertainties over fuel linkages, environment clearance and land and water availability.Equipment manufacturers fear under utilisation of their utilities if the order flow does not improve soon.
Equipment makers Larsen & Toubro and Mitsubishi Heavy Industries Alstom-Bharat Forge, Toshiba-JSW, Gammon-Ansaldo and Thermax- Babcoc & Wilcox, which have outlined India production plans, are expected t add about 20,000 mw capacity by 2014-15, against 15,000-mw annual capacity of state-owned monopoly Bharat Heavy Electricals.
"In recent months, land acquisition has become an issue and water is not available. The biggest worry is fuel availability. The coal ministry has not met even once in the past one-and-half years to allocate coal linkages," L&T Power MD Ravi Uppal told ET, adding that cost of debt had also increased substantially. Going by the industry's cost estimate of 6 crore per megawatt, these projects would require over 2,00,000 crore in investments.
The affected projects include those of Jindal Power Ltd, KSK Energy , Nevyeli Lignite Corp, Patel Engineering's PEL Power Ltd and state utilities of Rajasthan, Gujarat and Tamil Nadu.
State-run power producer NTPC's 7,260-mw tender for sourcing boilers has been held up for 15 months now because of the company's legal battle with Ansaldo Caldaie over a contract.
Domestic power equipment manufacturers including Bharat Heavy Electricals Ltd have been demanding a level playing field with Chinese firms, which account for about 33% of equipment supplied to Indian power projects. Chinese companies beat Indian equipment manufacturers not only on pricing but also in delivery time.
A senior official in Ansaldo Caldaie India said there are at least 20 projects stuck for various reasons. "No major order has been placed on private equipment suppliers in the recent past. There are many cases where we have submitted bids and not heard from power companies for one-and-half years now," he said.
Thermax India managing director M S Unnikrishnan said there was a slowdown in order placement mainly because of land and water availability issues, fuel scarcity and higher interest rates.
However, a senior official of Bharat Heavy Electricals said the company had a comfortable order book position. "We have not bagged any major order in the first quarter of current fiscal but we expect good flow during the second quarter."
The company had an order book position of over 1,64,000 crore on March 31.
A senior power ministry official said there has been a temporary slowdown in the sector due to various reasons, including coal and gas availability and delay in environmental clearances. "Equipment orders would be placed once the issues are resolved," he said.
The power ministry expects about 28 million tonnes of coal shortfall for power projects this year. The situation is similar for gas-based projects, as output at Reliance Industries' KG-D6 fields has been dipping.
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