Power producers voice concern over UMPP equipment sourcing

Private power producers have raised concerns over the Government’s proposed move to make it compulsory to source equipment from indigenous manufacturers by companies setting up ultra mega power projects in the country.

Companies are of the view that this move would further discourage power generation companies to execute ultra mega power projects in the country, which are already fighting environmental hurdles.

“Nobody is in favour of this proposal ... there is no guarantee that this move would lead to decrease in tariff ... you don’t even know whether domestic equipment would be delivered in time or not,” industry sources said.

“We are against any kind of protectionist measures,” they added.

The Ministry of Heavy Industry and Public Enetrprises has proposed to make domestic sourcing of equipment for the ultra mega power projects mandatory, a move to encourage indigenous manufacturers such as BHEL and L&T.

Meanwhile, the Association of Power Producers (APP), a body representing 22 private power companies in the country, feels the indigenous equipment makers have their plates full.

“The domestic manufacturers are already overburdened with existing orders and are not in a position to meet the demand of the project developers,” Mr Ashok Khurana, Director General, APP, said in a letter to the Finance Minister, Mr Pranab Mukherjee.

Indian producers have lacked the capacity to supply power plant equipment at desired schedules, import of equipment for power projects has been a major contributor in the capacity addition in the current plan period, Mr Khurana said.

He said, that in the absence of competition to the domestic power equipment manufacturing sector, there will be a likelihood of price hike and supply timelines also reverting to 60 months as has been witnessed in the past.

Meanwhile, industry sources said that BHEL has never been able to supply equipment in the stipulated timeline and are sceptical whether L&T would be able to do so.

“There is a big question ... can BHEL and L&T supply equipment in 48 months,” sources said.

The power industry is also of the view that any such move would lead to delay in implementation of the projects and would also lead to cost escalation of the UMPPs.

UMPPs are 4,000 MW projects envisaged by the Government to add bulk power capacity in the country.

State-run Power Finance Corporation is the nodal agency for these projects. It has so far awarded four UMPPs to the successful bidders.

Three of the four UMPPs at Sasan (Madhya Pradesh), Krishnapatnam (Andhra Pradesh) and Tilaiya (Jharkhand) have been bagged by Reliance Power. Tata Power is executing the Mundra UMPP in Gujarat.