Govt plans stricter norms that may restrict Chinese suppliers

The Indian government, which has long sought to protect local power equipment makers from Chinese rivals, is planning to introduce stricter efficiency norms that may make it difficult for Chinese manufacturers to compete even for private sector orders.

The power ministry has forwarded to the law ministry specifications prepared by the Central Electricity Authority (CEA), the top power sector planning body, for so-called supercritical power generation equipment (660MW and above). The law ministry will vet the specifications before they are enforced.

“We’ve sent the specifications set by CEA to the law ministry for vetting. After it comes back to us, we will notify them. This will help in improving the project efficiency and will reduce emission. We expect to notify this shortly,” said a power ministry official who didn’t want to be named.

What the move essentially means is that equipment providers will have to guarantee a lower heat rate to be eligible for supplying equipment.Supercritical equipment helps in higher plant efficiencies and economies of scale and is also environment friendly.Lower heat rates lead to lower coal consumption, thereby leading to higher efficiencies and lower emissions. Heat rate is expressed in terms of kilo calories required to produce one unit of electricity.

Stricter norms for heat rates for all supercritical units in the country will permit a “maximum gross turbine cycle heat rate of 1,850 kcal (kilo calorie)/kWh (kilowatt-hour) for turbine driven boiler feed pumps (BFPs)” and “1,810 kcal/kWh for motor-driven BFPs.”The move comes in the backdrop of tension between India and China over equipment supplies.

Over 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.

The Union government has already asked all Central and state power producers to make it mandatory for overseas suppliers to set up manufacturing facilities in the country, as reported by Mint on 3 February. Even private sector power developers will have to adhere to the new efficiency norms.

While a majority of the 660MW unit size project orders are being placed with Chinese firms such as Dongfang Electric Corp. Ltd (DEC), Shanghai Electric Power Co. Ltd and Shandong Electric Power Construction Corp. (Sepco), the implementation of the new norms may rule out imports from them as their equipment heat rates are above 1,850 kcal/kWh. Orders totalling 17,160MW of 660MW unit size have been placed with the Chinese.

“We’d asked for inputs from every power generation equipment manufacturer. Everyone participated except the Chinese manufacturers,” said a person associated with the process of preparing efficiency norms, who didn’t want to be named. “At the heat rates specified, Chinese will not be eligible to supply for units sizes of 660MW and above. They may be able to do so for 1,000MW unit size, but not for lower size supercritical equipment.”While the equipment of DEC and Shanghai Electric have heat rates of 1,920 kcal/kWh, heat rate of Sepco’s equipment is 1,860 kcal/kWh.

While the per-MW cost of completion of a thermal power project using Chinese equipment is around Rs3.5-Rs4 crore, it works out to Rs4.5-Rs5 crore for projects using other equipment.

“These norms can’t be applicable for plants which have been bid out. It can only apply prospectively. The developers will have to take cognisance of the fact while they bid for projects,” said Shubhranshu Patnaik, executive director at audit and consultancy firm PricewaterhouseCoopers.