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One sector that has taken the impact of cheap Chinese imports on its chin is power. Nearly 34% of all power plants – accounting for about 18,500 MW – constructed in India in the 11th five-year plan used Chinese equipment. Today, Chinese equipment accounts for 12%, or 25,000 MW worth, of thermal power plants in the country. What’s more, nearly 42,000 MW of capacity based on equipment imports from China are at various stages of commissioning.
Naturally, the space for Chinese imports was created by pushing Indian manufacturers aside. A Bank of America and Merrill Lynch report as far back as January 2011 said that one of the serious risks faced by Indian power equipment maker BHEL is that of Chinese companies undercutting them on price. A cost comparison in the study suggests that an average Chinese vendor’s pricing of a BTG (Boiler Turbine Generator) combination would be around Rs 1.6 crore per MW. BHEL would charge around Rs 2.6 crore per MW for the same product. As a result, BHEL had seen cancellation of orders from its order book. The company’s order book was filled with orders mainly from the National Thermal Power Corp (NTPC), another state-owned entity.
A heated debate has been raging in the power industry after Chinese suppliers started getting orders from Indian producers. In an article in Business Standard Ravi Uppal, then president of L&T Power, had written that with their huge manufacturing muscle, Chinese manufacturers could meet all of India’s power equipment demand for the next 20 years in less than five years. But is that in our national interest? Should China, and not India, be the principal beneficiary of the growth in the country’s power sector?
Where Chinese players scored over Indian manufacturers was in terms of lower finance cost and faster delivery. Against Indian interest rates of nearly 13%, Chinese players had access to funds between 4-6%. Further, because of their capacity they could deliver the goods nearly six months in advance. But the icing on the cake was that the Chinese were willing to even fund the projects because, by then, Indian banks had developed a dislike for the sector on account of a slowing economy.
Though Chinese players have been able to make inroads into the Indian power sector, questions have been raised on the quality of power plants. Central Electricity Authority (CEA) evaluated the performance of Chines power plants and compared it with those supplied by BHEL. The study revealed that Chinese power gear on all key operational parameters - operating load factor, heat rate, auxiliary consumption, frequency of forced outages, breakdowns, etc - and safety mechanisms scored lower than BHEL equipment.
The report said that “Chinese turbines do not have safety functions like turbine stress evaluator and auto turbine run-up systems. The level of automation or control systems of Chinese turbines is not in line with present-day turbine designs and technology... leading to the possibility of compromised safety and mal-operation."
