The order books of state-owned Bharaat Heavy Electricals Ltd (BHEL) could soon be overflowing, as the government is likely to allow the power equipment behemoth to ink long-term independent tie-ups with developers of ultra mega power projects (UMPPs).
A power ministry official, who did not wish to be identified, said the move has a two-fold objective. “It would prevent UMPP promoters to source equipment from foreign manufacturers, while it would strengthen the domestic power equipment industry,” the official said.
“BHEL could join hands with Anil Ambani-owned Reliance Power Ltd for its proposed Rs 17,000 crore, 4,000-mega watts unit at Krishnapatnam in Andhra Pradesh for long term sourcing of equipment,” he added.
The government is also mediating a similar tie-up between Tata Power and BHEL for long-term engineering, procurement and construction (EPC) contracts.
When contacted RPL official declined to comment on the issue. However, a senior official with Tata Power, who did not wish to be named said, “We have long standing association with BHEL. We are in discussion with them to find out the other areas that we can work together.”
He also clarified that Tata Power had not inked any pact with BHEL or the government for long term equipment sourcing.
Both RPL and Tata Power are executing India’s three largest thremal power generation projects. RPL is executing two projects of 4,000 mw each at Sasan in Madhya Pradesh and Krishnapatnam in Andhra Pradesh. Tata Power is developing a 4,000-mw project in Mundra in Gujarat.
BHEL’s current order book stands at Rs 50,265 crore and the company is planning to scale up its manufacturing capacity by 50 per cent to 15,000 MW per annum by end-2009.
The latest initiative, if successful, would prevent super-critical equipment coming into India from foreign firms, including China, the official said. China has emerged as a major shopping hotspot for power equipment that are 18 to 20 per cent cheaper than their global peers.
Private sector power companies have ordered Chinese equipment for executing projects that would add 20,000 MW generation capacities in India by 2020.
However, “The success of government’s latest initiative, would also rest on BHEL’s pricing policy,” the official said.
When contaced, a senior BHEL official said, “The prices would be determined on a negotiated basis. We will ramp up our manufacturing capacity to meet the ever-increasing demand in the power sector."
The government is also finalising a policy that will make it mandatory for any foreign power equipment firms to set up manufacturing facilities if they are keen to supply equipment to Indian power firms, especially to UMPPs.
The proposed policy, awaiting approval from the Prime Minister's Office, will help Indian power equipment makers a larger market share.