Chinese firms pip BHEL in gear supply to thermal power projects slated to come up in the next five years

Chinese companies have edged out state-owned Bharat Heavy Electricals Ltd (BHEL) as the top equipment suppliers to thermal power projects slated to come up in the next five years.

This comes even as the Government has been dragging its feet on a decision to impose a levy on equipment imports, including Chinese gear, to bridge an alleged duty differential being faced by domestic manufacturers.According to the latest equipment ordering status for the 79,000 MW of fresh capacity slated to come up in the Twelfth Plan (2012-17), Chinese vendors have bagged contracts for supplying electro mechanical equipment adding up to 28,740 MW. This is against the 27,746 MW to come from BHEL during the five-year period.

Private show

Of the Twelfth Plan orders booked by Chinese firms, 96 per cent, or 27,540 MW, are from private project developers. Cumulatively, if hydro and thermal project orders are considered, BHEL manages a slender lead over the Chinese equipment makers, which include state-owned firms such as Dongfang Electric Corporation, Shanghai Electric, Sichuan Machinery and Equipment and Shandong Electric Power Construction Corporation.Hitherto, BHEL has been the top supplier of main plant equipment for thermal projects and the mainstay of the country's power sector during the previous Plan periods.

Domestic suppliers

For the Twelfth Plan, apart from BHEL, domestic manufacturers, including the L&T-Mitsubishi Heavy Electric combine, Bharat Forge-Alstom and Toshiba-JSW have cumulatively clocked orders worth 10,182 MW.Foreign suppliers other than the Chinese, including Korean firm Doosan and Russian firm Power Machines, have got orders for over 7,000 MW.According to the latest data, central sector firms, led by NTPC Ltd and Neyveli Lignite Corporation, are yet to place a single order on Chinese equipment suppliers.

Quality concerns

Besides the duty issue, there are several quality concerns surrounding Chinese gear, and question marks about their capability to offer services post-commissioning. An even more important issue being flagged is the prospect of an over-reliance on Chinese equipment, without access to adequate and rightly-priced spares. This could, going forward, create a serious crisis for the power sector as a whole, according to experts.Private sector players, despite facing glitches when using the Chinese equipment, have continued with these imports citing faster delivery and lower upfront costs. The Power Ministry, too, has been backing the Chinese equipment imports.

Domestic disadvantage

With Chinese gear manufacturers gaining ground, domestic firms led by BHEL and L&T had been pushing for the implementation of recommendations made by a Planning Commission panel. The Arun Maira-headed panel estimated a 14 per cent duty disadvantage faced by domestic firms for mega projects, which was proposed to be bridged through the levy of a 10 per cent Customs duty and 4 per cent Special Additional Duty.The Union Cabinet, which was to have taken a decision on the issue last year itself, has been deferring a final call amid lobbying from user groups in favour of deploying Chinese gear in their projects.

On a cumulative basis, including Eleventh Plan projects, equipment contracts for well over 40,000 MW of upcoming power capacity are estimated to have been placed with Chinese vendors, none of which plan to set up a manufacturing base in the country.Currently, equipment imports attract a zero levy under the Centre's Mega Power Policy for thermal projects of 1,000 MW and above.