"India Electricity 2008" was a
grand event organised by Ministry of Power in association with Federation of
Indian Chamber of Commerce and Industry and was held at Delhi on 11th
to 13th of September, 2008. I recall, in the beginning of 2006, when
we were preparing for formulation and launch of the Ultra Mega Project Scheme to
invite large scale and wider participation of private sector into power
industry, apart from many other ingredients necessary for success of this
Scheme, we felt that an international road show would be a good idea to showcase
various Legislative and Policy initiatives of the Government. It was decided in
the Power Ministry that an industry partner would be necessary in this series of
exercise. Accordingly, FICCI was identified to partner with Ministry of Power
to organise series of Conferences and Seminars and, if required, Exhibitions
throughout the world in important locations, to project the enormous investment
opportunities which have emerged post Electricity Act 2003, National Electricity
Policy 2005 and a series of other Policies. The Flagship Scheme viz. Ultra Mega
Project each of which had a scope of investing almost US $ 4 billion would be at
the centre of the focus. It took a few months to conceptualise and structure
the "Indian Electricity 2006 - Conference and Seminars." In the third programme
in 2008, therefore, one could see, both from the contents including quality and
delivery, significant improvements.
I had the opportunity to chair
the Plenary Session on "Capacity Building: Equipment Manufacturing". Five lead
presentations were made - by the Country President of Alstom India, Regional
Executive of GE Energy India, Chief Operating Officer of L&T - MHI Joint Venture
Company, Executive Director Engineering of NTPC and Executive Director of NHPC.
Relevance of this Session may be understood in the context of equipment supply
emerging as the most crucial constraint to meet the ambitious capacity addition
programmes during the Eleventh Plan and subsequently. It may be recalled that
it is not only for the Eleventh Plan, where we scaled up the targets, of course
after considerable amount of preparations during the last three years of Tenth
Plan itself, that the equipment supply is posing to be a major area of concern.
In fact, one of the most important reasons that a large amount of capacity
targeted to be commissioned during the Tenth Plan slipping to Eleventh Plan, was
the delayed supplies of plant and machinery and subsequently lethargic progress
on construction, erection and commissioning by these equipment suppliers.
Composition of the Panel of Speakers in this Plenary Session was balanced,
inasmuchas we had both the major equipment manufacturers as also the generating
companies, though the presence of the representation from BHEL, though slated on
this Session, could not be secured.
I propose to highlight the
salient aspects of this Session in the following manner - (a) the perspectives
and concerns of the manufacturing sector, (b) the perspectives and concerns of
the generating organisations, whose performance in recent years has been
adversely affected due to inadequacies in capacity additions and the
apprehension is that in the future it could be affected even more adversely, and
(c) perception of other stakeholders and of those interested in the development
of the sector.
First the perspectives of the
We all know that
the power sector showed all the seriousness for a massive expansion during 90's,
but the experience showed that the equipment suppliers kept waiting for orders.
Therefore, the premise that the sector provides now a great opportunity has been
viewed in the manufacturing sector with a degree of disbelief and skepticism.
But, it is also a fact that the manufacturing sector has been grossly wrong in
making such assumptions, because the opportunities provided now, post
Electricity Act 2003 and a host of other Policy initiatives, are not only
different but, both quantitatively and qualitatively, there is a significant
change in what existed throughout 90's and what the sector offers now. Any
concerns, doubts, uncertainties and a degree of skepticism, therefore, are
totally misplaced. These should have no place in the changed scenario of Indian
now do recognise that the disconnect that seems to have crept in is entirely due
to the miscalculation of the manufacturing sector in not being able to see the
writing on the wall and to predict the wave of opportunities which were to come
up, a few years ahead of the time they really surfaced. Therefore, the sector
has been caught napping; opportunities are there, orders are mounting on
manufacturers, but they find themselves in a position that they cannot cope with
the demands in the time frame in which these supplies are required to be made.
It was heartening
to listen to these expressions and admissions of the fact that the manufacturing
sector does recognise the folly of its own approach in not believing that the
sector was really in for the type of transformation that is happening. This
recognition and admission of the disconnect in their approach has indeed led to
a number of them coming forward to fill up the gaps as quickly as possible by
expanding their existing capacities and, by many, in creating new capacities.
It is also a fact
that globally the demand for additional power generation capacity, whether on
account of need for more power or on account of replacing the existing
generation facilities with new technologies, has led to enormous amount of
pressures on manufacturers all over the world. This phenomenon is no doubt,
more true for those developing countries which are now trying to catch up with
the rest of the world, and particularly for large countries like India. But, to
some degree, it has emerged as a universal phenomenon. Therefore the crisis
like situation of suppliers not being able to meet the needs of power generating
companies would remain as an area of challenge for some more years.
Preparations which are happening in India and expansions that are taking place
elsewhere would definitely lead to lessening of stresses and strains.
Apart from the
need for additional generation capacities, another factor which is also
contributing towards this problem is the development of, in many cases,
renovation, modernisation, retrofitting etc. in response to the changing demands
on environmental considerations. Coupled with this is also the fact that old
plants need to be replaced and new ones need to be set up with latest advanced
One of the reasons
that the manufacturing sector has remained conservative in its approach towards
investments and expansions is its apprehension about the returns on these
investments. Beaten by several years of stagnation in demand, throughout 90's,
their conservatism stands justified. However, the grievance of the utilities
also stands vindicated because this conservatism continued for a much longer
period than perhaps was necessary.
changes in the power sector have to keep pace with the expectations of
stakeholders and public at large on environmental safeguards. Power generation
technology definitely needs to be more energy efficient. Limited reserves of
fossil fuel in India and the world have to be used in a manner that the
conversion efficiency is maximised.
development, aimed at technologies which will make the fossil fuel consumption
more energy efficient and meet the strictest possible environmental norms, needs
to be pursued. On this score a lot is being done by major global manufacturers
of power plant equipment and systems. The areas which need deeper research and
technology development, are areas in the new and Renewable Energy fields. In
the technologies on wind, bio-mass, solar, geothermal etc. good progress has
been made but a lot more is required.
Apart from these
major areas of technology and capacity expansions, an important issue which
needs a better degree of appreciation by the power project developers is in
relation to the Qualifying Requirements for tenders for projects, based
particularly on new technologies. Quite often, attempts at developing new
technologies and systems get dampened and discouraged, and sometimes even
frustrated, because of the approach, attitude and mindset of these power project
development companies which want, as a prequalification criterion, certain years
of experience. In such a situation the exercise and initiative on new
technologies can become a non-starter. It is needless to say that a new
technology will obviously have no operating experience, and if it has operating
experience it cannot be a new technology. Therefore it is the considered view of
manufacturers - and it needs to be appreciated by all - that in the development
of new technology, efforts of manufacturers are as important as approach and
considerations by those who are going to use that technology.
Now let us analyse the
perspectives of the generating companies.
economic growth is closely and directly dependant on electricity. If the
country could not achieve a sustained GDP growth of 9 to 10% over the last 25
years, as China could do, it was primarily because electricity generation growth
did not support such a growth pattern. Now that all other ingredients of two
digit GDP growth to be achieved, in a sustained manner, in next few decades, are
being put in place, all of us need to commit and ensure that the electricity
sector does not come out as the main obstacle in securing such an economic
years of slow progress in capacity addition programmes, mainly on account of
less enthusiastic response from developers, lenders and equity partners, the
sector is now poised for a rapid capacity addition programme. What has been
experienced in last 5 to 6 years, during which there has been unprecedented flow
of orders for supply of power plant equipments and systems, the deliveries have
let down the project developers on schedules.
BHEL, the main
power plant equipment supplier for boiler, turbine, generator and transmission
systems, is not the only organisation which has been the focus of attention on
such delays and defaults, though they constitute the main proportion of such a
problem, in fact, Balance of Plants (BOP's) have equally been the target of
attention. These suppliers have also been standing in the way of smooth
execution and commissioning of new power plants.
months of delays, when plants and machinery arrive at the sites, invariably it
has been experienced by most of the utilities that the preparedness of the
suppliers of the equipment has been far from being satisfactory. Thus several
months of delays in supply have invariably been compounded with several months
of further delays because of construction and erection agencies being inadequate
in their tools and tackles as also their manpower. It has also been experienced
that when several sets are in the advanced stage of commissioning, the
commissioning teams of equipment suppliers have been found to be lacking in
numbers, and sometimes also in skills, thus further delaying the project
In the recent
years because of the pressures on power plant suppliers and suppliers of
associated systems, contingency arrangements have become routines than
exceptions. As a result, most of the sets though commissioned, take several
months before their smooth commercial operation commences.
It need not be
repeated that perhaps living for too long a period only with the BHEL as the
only power plant manufacturer of boiler, turbine and generator has proved costly
for power sector. Less than aggressive - in fact too conservative - approach of
BHEL in not seeing the tides and predicting the future opportunities has kept
BHEL somewhat complacent in their expansion programmes. During the period in
which countries like China not only multiplied their manufacturing base in the
existing factories but also increased the number of factories itself, in India
we have remained stuck up with the same number of factories even within BHEL.
To place the issue in the right perspective, it would be relevant to mention
that at this point of time when the country needed about 20,000 MW per year of
manufacturing capacity we are at less than 8,000 MW capacity, in fact, a year
back we were only about 5,000 MW of annual capacity.
Balance of plant
sector such as coal handling systems, ash handling systems, transmission
equipment etc. have also been falling behind in terms of their manufacturing
capability. There are several examples that main plant got ready but commercial
operations lagged behind in view of inadequacies from the suppliers of these
balance of plant facilities.
sector, which has a significant potential in the country, of the order of
150,000 MW, but tapped to the extent of only 35,000 MW, has been attended to
even to a lesser degree by the domestic manufacturing industry. The first
largest project of the country viz. Naphtha Jakhri Project which has 6 Units of
250 MW each has the main plant supply from outside India. Similarly the 1,000
MW Tehri Project (5 Units of 200 MW each) has also the main plant supply from
outside. Technological upgradation in hydro sector, in so far as the domestic
manufacturing goes, has been far from being satisfactory.
track record on Combined Cycle Gas based power plants has remained far behind in
terms of technology. We continue to depend almost fully on import for large
integrated Combined Cycle Power Plants.
Technology, which was to be brought in Indian manufacturing during the Tenth
Plan, has not only lagged behind, but even in the Eleventh Plan its
manufacturing in India seems unlikely. In the face of global pressure on India
against excessive dependence on fossil fuel based generation, there is an urgent
need for a good amount of coal based capacity based on Super Critical Technology
to be added in the Indian power sector profile. Hopefully marginal additions
should happen towards the end of Eleventh Plan and a little more in the initial
years of Twelfth Plan. But unfortunately these would not be based on
manufacturing from Indian origin. Therefore, there is an urgent need for self
introspection by the Indian manufacturer as to why the Indian power sector has
remained deprived of deploying the latest technology of power generation.
sector, specially from the point of view of Extra High Voltage (EHV) and Ultra
High Voltage (UHV), has not made significant headway and assimilated into
manufacturing the global advancements of technologies in HVDC.
There has been
reasonable progress on power generation through wind energy and we must
compliment the manufacturers in this area not for only meeting the domestic
needs but also exporting a good amount of capacity. But in other areas of new
and Renewable Energy generation such as solar systems, geothermal etc. the
progress is not at all satisfactory.
In the wake of the
latest achievements on global collaboration in the nuclear field, preparedness
of Indian manufacturers for nuclear power plants will need to be taken up on a
Indian coal has
its advantages but it also has a lot of limitations and disadvantages. Keeping
in view the expectation on account of environmental considerations it has been
long overdue that Indian power sector is provided with IGCC Technology. Some
efforts have been made in last 15 years but there is considerable scope for
accelerating these efforts with enhanced commitments on the part of the
A presentation was
made by the latest initiative of L&T and MHI of Japan to set up the boiler
factory to meet the Super Critical Technology requirement. It is gratifying
that after the initial concerns and noises about the inadequacies of Indian
manufacturing sector, there are a number of agencies which have come forward to
set up boiler turbine and generator factories. L&T initiative is one of them.
In fact, even NTPC and BHEL have decided to set up the facility to produce super
critical turbine and generators. Bharat Forge has also planned to set up a
factory. It is understood that there are a few others as well. On the balance
of plant also a number of new initiatives are being put in place to set up
factories of different capacities. Also the existing ones are being expanded.
Therefore, this subject has captured large scale attention and that is leading
to appropriate scaling up of the manufacturing base in the country. It is not
to say that India's total needs to create additional capacity would have to be
met only through domestic supplies. At the same time it is important to
emphasise that, if, India plans to add 25 to 30,000 MW a year after about 10
years or so, its domestic base should atleast be of the order of 20,000 MW if
not more. The attention of a number of private sector manufacturing companies
as also of public sector organisations including BHEL in this regard has been a
very positive development and its significant impact is going to contribute
effectively in the power development programmes of the country.
An important point that emerged,
as a conclusion, is in relation to the need for change in the approach of power
project developers in respect of formulating the Qualifying Requirement in their
tender. It was agreed that unless developers come forward and facilitate and
encourage new factories to come up by suitably structuring their qualifying
requirement, the benefit of competition in supply of power plant equipment, may
not be right for them to expect. To some extent their approach has been
responsible in throttling the process of new initiatives in setting up
manufacturing capacities. No doubt, their approach, coupled with suitable
commercial arrangements such as extended warranties with commercial backups,
could lead to a win-win situation, in which new factories could come up and at
the same time the power plant owners could have their level of confidence raised
through extended warranties on performance.
If India has to have 800,000 MW
by 2032, its domestic annual manufacturing capacity has to rise to atleast
20,000 MW in next 10 years and to atleast 30,000 MW in next 15 years.
Corresponding expansions will be required in respect of the Balance of Plants.
Similarly, commensurate capacity building would be necessary for construction
and commissioning of plants. Such expansions would be, it is expected,
forthcoming from public sector as well as private companies. Concerned
Government agencies may need to facilitate these developments.