Till now the power equipment segment was dominated by Public Sector Company BHEL. But now times have changed, equipment manufacturer from the private sector such as L&T Power have also started making inroads. The competition is not only from private sector enterprises but also from across the border mainly China, Korea and other countries. Foreign companies have started bagging equipment orders from power generating companies in India due to cheaper costs & faster deployment. Private sector power companies such as Reliance Power have ordered Chinese equipment for their projects including Ultra Mega Power Projects (UMPPs).

Huge Opportunities
The power equipment sector is bound to grow exponentially. Based on the targeted capacity of 8,00,000 MW mark by 2030 as per industry estimates. More than 30,000 MW capacity additions would be required annually which can accommodate not only the local players but also the foreign ones. On the contrary, without foreign collaboration or supply, this seems to be unachievable at this point of time, unless and until huge investments are made locally and pace of manufacturing is increased.

Chinese Concerns
Chinese companies like Shandong Electric Power Construction Corp, Dongfang Electric Corp, Shanghai Electric Group Co. Ltd, and Harbin Power Equipment Co. Ltd are in the aggression mode which can be seen from the number of orders which they have bagged from Indian Power Companies beating the local manufacturers. Due to this, the import of Chinese equipment in the power sector is picking up as the cost advantage weighs heavy on their side. Chinese imports are far more lucrative as have the advantage of zero duties as per our mega power project policy. It is believed that Government of India is reviving a plan to scrap its mega power plant policy, imposing a 5% customs duty on the import of equipment that goes into thermal projects that will generate at least 1,000 megawatts (MW). This will provide protection to the local manufacturers which is quite debatable as the cost of procuring equipment from the local manufacturers is relatively high compared to the cheaper Chinese imports. Also since the local manufacturers are not able to meet the growing demand, Chinese companies are having a play time in India. In the short term, the Chinese imports should be used to bridge the demand-supply gap. The long term view should be to encourage more of local manufacturing by providing incentives to both local and foreign companies to set up manufacturing units in India.

Advantage Local
Apart from public sector company – Bhel, there are many heavy weights who have set up or are in the process of setting up manufacturing bases in India such as JV of Ansaldo Caldaie SpA and Gammon India Ltd; L & T and Mitsubishi Heavy Industries Ltd; Toshiba Corp and the JSW Group; BGR Energy Systems Ltd and Hitachi, Thermax Ltd and Babcock and Wilcox Co and Doosan Heavy Industries and Construction Company Ltd. The customer focus will largely be driven by cost competitiveness, efficient systems, timely delivery and technological innovation.

State-owned BHEL synchronized 9,442 MW of generating equipment in the last fiscal. This accounted for about 57% and 89% of total thermal and hydro capacity additions in the country. The company has an edge over Chinese imports in respect of efficiency of power equipment. The offerings in terms of boiler, turbine, and generator make up for around 40-45% of the requirements of a power plant. To counter Chinese imports, BHEL has even gone one step forward and is forming JV in developing State power projects provided the JVCs source the main power plant equipment from BHEL. Raichur Power Corporation Ltd, a JV formed by BHEL with Karnataka Power Corporation Ltd (KPCL), has placed an order (Letter of Award (LoA) on BHEL for Rs. 6,300 crore in April 2010 for the 2x800MW Yeramarus project, and Letter of Intent (LoI) for Rs 3,601 crore in September 2010 on BHEL for the 1x800MW Edlapur project, for supply of main power plant equipment for the respective projects.

Capex Plans
BHEL has also established the capability to deliver 15,000 MW per annum and further augmentation to 20,000 MW per annum is underway. The Trichy Unit is presently augmenting its manufacturing capacity of steam generator and valve facilities. BHEL is also setting up a Power Plant Piping Unit at Tirumayam in Pudukottai District of Tamil Nadu. These projects are planned for completion by March 2012 with an investment of around Rs 600 crore.

L& T and MHI are having a plant to manufacture supercritical boilers and turbine at Hazira. This facility was developed at a cost of Rs 4,000 crore. They have an annual capacity to manufacture 5,000 MW of equipment which is likely to be expanded to 6,000 MW by 2012.

South Korean power equipment-maker Doosan plans to set up a power equipment manufacturing unit at Chennai in Tamil Nadu.

Alstom and Bharat Forge are coming up with a plant to produce turbine generators with a capacity of around 5,000 MW per annum at Mundra, in Gujarat. This is likely to be operational by 2012.

Future Outlook
The present installed generation capacity in India is about 1,81,000 MW, more than 80,000 MW of new power capacity is under construction. The 12th Plan aims at a capacity addition of nearly 100 thousand MW. During the 11th Plan period from 2007 to 2012, the funding requirement in Indian Power Sector had been estimated at USD 230 billion, and the similar investment is anticipated for 12th Plan. The Ministry of Power has identified 16 Ultra Mega Power Projects (UMPPs) and 14 Inter State Transmission schemes for development by the private sector on competitive bidding route. Bidding of four Ultra Mega Power Projects and six transmission projects have been completed so far. 5 UMPPs are in the pipeline, for which Special Purpose Vehicles (SPVs) have been created by the PFC. All these would translate into billion dollar opportunity for the equipment manufacturers.