In the recent couple of years
the activities in the Indian power sector have been pitched up to a level that
the focus of attention has shifted from non performance of developers of power
projects to the lack of capacities of manufacturers to be able to fulfill their
commitments in terms of scheduled deliveries of plant and machinery followed by
their smooth and timely execution. The gravity of situation has emerged so
strongly that pendulum seems to be swinging to the other side - from a lazy and
lethargic approach to expansion of manufacturing capacities by the existing
power plant manufacturers to a number of new agencies showing interest and
coming forward to set up new factories to produce boilers, turbines, generators
etc. There are many such agencies but atleast three to four of them are
seriously pursuing their efforts. In the light of this, financing of the
expansions of the manufacturing sector has emerged as an important issue.
It is true that
during the entire period of 90's and also first few years of the last decade of
the last century, power project developers provided enough reasons to the
equipment manufacturers to be not only frustrated but in fact to be skeptical
about the promised plans and programmes of power project capacity expansion.
For example, just after the announcement of Private Power Policy in 1991-92,
there was a euphoria for setting up as much as over 50,000 MW of capacity by
dozens of power project developers. In a large number of cases, coal linkages
were provided, and equipment manufacturers entered into MOU's for equipment
supply. But, finally in a period of over ten years not even 7,000 MW of
capacity could materialise. This historical truth led all those concerned with
power development programmes to believe that perhaps the state of affairs would
remain as they were and the new claims of the power sector that the things have
changed and that expansions proposals are now more concrete and real were being
equipment manufacturing sector have proved to be not only misplaced but entirely
wrong. Upto the end of Ninth Plan (2001-02) the story was different.
Apprehensions of coal sector and equipment manufacturing sector were indeed
fully supported by disappointing performance of the power project developers in
not being able to place workable and committed Letters of Awards on equipment
manufacturers. However, where the estimation of manufacturing sector went wrong
is in their inability to really understand the likely impact of the
transformation that was emerging in the power sector. The thrust of the
Government Policy re-orienting priority on distribution sector reforms, the
pressures on State utilities to perform to comply with the conditions of the
Tripartite Agreement, the radical overhaul of the electricity sector through
powerful provisions of Electricity Act 2003 and host of other policies were
setting a momentum in the sector whose impact should have been better understood
and appreciated. Their disbelief about the committed expansions of this sector,
even in the wake of the transformations being caused by the reform initiatives,
as mentioned above, has emerged incredulously misplaced and wrong.
After the passage
of the Electricity Bill, when the Act became effective in June 2003, I had
series of interactions, and in most cases at regular intervals, with each of the
important sub-groups of electricity equipment manufacturing sector, viz. main
plant, balance of plants and transmission systems including transformers etc.
The objective of these interactions was to disseminate with them the
unprecedented expansions that the power sector was coming to the faced with and
the nature of expansions and preparations which were needed by the manufacturing
sector. Though it was difficult to convince them, most of them agreed to
initiate their own plans of actions to match the expansion needs of the power
sector. Many of them did take initial steps. What is, however, not explicable
is the inordinate delays that have happened in effecting these expansion
programmes. In the last three years, when the failures of these manufacturers
came up as the most important reason for delays in commissioning of about 11,000
MW capacity in the last year of the Tenth Plan in various projects, all of which
slipped to the first year of the Eleventh Plan, the matter received wide spread
attention and the manufacturers were confronted with severe most criticism.
The contention of
the manufacturers that they could not consider to create additional
infrastructure unless they had firm orders is difficult to appreciate, in fact,
very difficult to believe that such an approach could even be thought of. It is
the industry which supports an expansion. If China could create a capacity of
more than 600,000 MW in a period of about 50 years, during which India could
create only 125,000 MW, it is primarily because China created a manufacturing
base, within the country, which could support capacity expansion of the order of
70,000 MW per year. As against this, in India, even after 50 years, we could
have a manufacturing base which could support domestically not more than 5,000
MW per year. The point is whether chicken is first or the egg is first. Even
though there would have been periods of fluctuating demands, sometimes even
slowdown or recession, manufacturing sector cannot make a logical point that
orders have to be first before capacities to manufacture are created. Expanding
manufacturing capacity itself has a gestation period. For example when the
power sector started placing orders during 2002 and right through upto 2006 -
and the process continues - it has been proved that the fallacious and flawed
approach of the manufacturing sector that the orders should have been earlier
than their expansions of manufacturing base has been proved not only wrong but
it has been very costly for the power sector and, in fact, for the economy as a
The problem has
not remained confined to manufacturing of main plant equipment alone - boiler,
turbine and generator. But Balance-of-Plants (BOP) such as Coal Handling, Ash
Handling, Cooling Water, D.M. Plant etc. have been serious causes of concern in
view of inordinate delays in their supplies and commissioning. We need to
ensure this. Power Generation Utilities and Main Plant Manufacturers need to
encourage and facilitate expansions of BOP factories.
experienced, in last three years, that with a lot of follow ups when the
equipment arrives, six to twelve months delayed, their construction, and
commissioning gets further delayed in view of inadequacies of construction
agencies - both in terms of number and quality. Equipment manufacturers would
not be right if they took a position that there job is to manufacture and what
they could do if sufficient number of construction agencies of right standards
are not available. In fact, they need to develop such agencies.
machinery and technology available anywhere in the world need to be brought into
power project development. A lot of delays and failures could be attributed to
the absence of latest techniques, technologies, tools and tackles in our
construction activities. Our Hydro-projects particularly need substantial
modern methods in construction.
skilled manpower in project construction has also emerged as a challenge in last
two to three years when activities have expanded. Crash programmes to develop
sufficient number of skilled people is essential.
Global warming and
climate change consequences place different sets of demands on equipment
manufacturers. These expectations would create further challenges on innovative
technologies and designs. We have to develop our plant and equipment based on
natural resources that we have. If our coal has more than 40% ash content,
manufacturers need to develop technologies and designs aimed at mitigating
environmental problems emanating from such qualities of coal.
in use of fuel is another major challenge for equipment manufacturers.
Availability of fuel is limited. Technologies which will minimise the
consumption of fuels while producing power are badly needed in Indian context.
Our habit to depend on other countries to develop technologies for us must go.
Domestic manufacturers must focus on this.
R&D efforts by
manufacturing sector leaves much to be desired. R&D budget must increase.
Brilliant engineers and scientists need to be placed in R&D centres and we need
to create right environment for our research personnel to be motivated and to
deployment of Integrated Gasified Combined Cycle (IGCC) power plants suited to
Indian coal has been over due. BHEL alongwith NTPC and other organisations need
to have a time bound approach on this.
Nuclear power is
going to occupy larger proportion in coming years and its share may increase
from less than 3% now to more than 6 to 7% in next 25 years. We need to develop
manufacturing capability. Initiative of BHEL in this direction is a positive
New and Renewable
systems of power generation need further focus. While on wind turbines we have
made good success, we need to do a lot on bio-mass, geo-thermal, tidal and solar
energy. In these fields again, our typical approach to look west must end.
Equipment manufacturer in India need to have long term R&D strategy in each of
these to innovate cost effective technologies.
Extra High Voltage
(EHV) Transmission and Ultra High Voltage (UHV) Transmission systems need to be
upgraded. Indian manufacturing must bring 765 KV (and even higher rating)
together with HVDC into domestic manufacturing capability. When 70,000 MW to
100,000 MW of capacity per Five Year Plan are being targeted, challenges of
Transmission System will multiply calling for new technological approaches.
of manufacturing together with R&D will need suitable financing inputs. In last
five years, even with existing infrastructure, the manufacturing sector has
improved its turnover and profit manifold. Financially they are strong.
However, financing needs of the sector will require to be met in the same manner
as the financing needs of power projects. Future of Indian power sector
expansion is very much dependent upon the expansion power equipment manufacture