From thermal to solar units, China dominates India's power sector

Right after winning India’s largest solar cell manufacturing tender this month, Gautam Adani, chairman of Adani Enterprises, was reported to have said he would edge out Chinese solar products in 3-5 years. This would be an uphill task, given the fact that Chinese firms supply equipment for 78 per cent of India’s solar power project market.

Owing to a robust supply chain and remarkably low prices, China has been fuelling the power sector's growth in India for about two decades now — from coal powered units to solar power. 

Barring a few, all privately-owned thermal power units, roughly about 40,000 Mw, constructed over the past decade were built using Chinese equipment. While public sector units have relied on BHEL for Boiler-Turbine-Generator (BTG) for their units, private players like Essar Power, Adani Power, Reliance Power, and GMR Energy have Chinese companies as their BTG suppliers, according to data from the Central Electricity Authority.

Anil Agarwal,Executive Chairman, Vedanta Resources wrote on Twitter, "Most of the power plants in India are imported from China. BHEL, a PSU, is very capable to produce the best power plants in the world. If given full autonomy and either corporatized or privatized, without laying off any personnel, it can do wonders for #atmanirbharIndia." However, all thermal units of Sterlire Energy, power generation subsidiary of Vedanta has sourced its equipments from China, according to the CEA data. 

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Chinese solar cells and modules have been instrumental in the growth of Indian solar power generation. The primary reason for this is the lack of an Indian solar supply chain, said a Delhi-based solar project developer. India’s solar cell manufacturing capacity stands at 3 Gw and for modules (finished product) it is 5 Gw, while the country’s solar power generation capacity stands at 32 Gw.

“Current domestic capacity is not enough to supply for mega solar projects. There are two issues – one is the quality and second is the cost. Even if cells and modules are made in India, the components come from China. In terms of price, Indian products are nowhere near Chinese ones,” said a power producer.

Chinese solar imports jumped by 596 per cent in 2013-14, when tendering for solar projects here gained pace. Imports from China grew till 2017-18, before slowing from 2018. Slowdown in project award and also imposition of safeguard duty on Chinese solar products led to a 24 per cent reduction in solar import.

Analyst reports suggest China is planning to reduce the benchmark price of solar photo-voltaic panels by 9 per cent, thereby reducing the price of a panel to $35-38 per kwh. This is globally the lowest price of a solar panel. Project developers are expecting increased imports from China, as the lockdown eases.
 

At the same time, electrical and electronics makers have long been complaining against their Chinese counterparts over their low rates and security concerns. Despite this, imports have continued to grow — import of Chinese electrical equipment grew by 19 per cent  in the past decade, according to Indian Electrical and Electronics Equipment Manufacturers’ Association (IEEMA).

“There are cost aberrations between India and China. The cost of land, finance is higher in India compared to China, also the lack of labour reforms. Given that India is a price-sensitive market, state utilities and contractors prefer cheaper Chinese material,” said an IEEMA executive.

He said import of raw material cannot be done away with, but import of finished products should be restricted. “The Centre recently notified that we will have a reciprocity approach towards imports from countries that stall our exports. This needs to be emulated at state level as well to increase capacity utilisation of domestic electric equipment,” said the executive.

Sector executives said the Centre and states should provide easy capital and preferential procurement for domestic equipment. “Basically take a leaf out of China’s manufacturing policies,” said a senior executive.