PowerGrid's bidding norms to hit Chinese vendors

In what could close the doors for import of Chinese equipment in power transmission, state-run Power Grid Corporation is making it mandatory for suppliers to have manufacturing facilities in India within three years. The company's board is likely to approve the proposal in its meeting on July 2.

The move could encourage Chinese investment in manufacturing of equipment in India. PowerGrid is the dominant power transmission company in India.

"The Chinese equipment firms should have a manufacturing base in India or tie up with an Indian company for servicing. After sales service is a major issue. We have made a draft note on this, which will be approved by the board," Power Grid Chairman and Managing Director S K Chaturvedi said.

India's largest power generator, NTPC Ltd, has already made domestic manufacturing a pre-qualification criterion for companies to bid for its boiler and turbine tenders. The controversy over the use of Chinese equipment, that are cheaper than domestic equipment, in the infrastructure sector has been on for some time. In the telecom sector, Chinese equipment suppliers Huawei and ZTE are significant players, but the government plans to make security clearance and audit mandatory for such supply.

In the power sector, the debate is more about quality, though Chinese companies are informally not hired for hydropower projects in border states. One of the major Indian companies that faces competition from cheaper Chinese imports is BHEL, which enjoyed a monopoly in power equipment supply till a few years ago. A senior BHEL executive claimed its equipment in the long run was cheaper due to the lifecycle cost.
"Ninety per cent of contracts which we have got in the past one year are from private power generators who take into account long-term costs. Competition has been present for a long time, but other companies (including those putting up facilities in India) will take at least 10 years to achieve what we have already achieved," he said.
Though PowerGrid does not depend heavily on Chinese firms for equipment, it earlier this year awarded a contract worth Rs 760 crore to two Chinese firms, TBEA Scawang Transformer and Boarding Tianwei, for supply and erection of transformers and reactors.
Chaturvedi said the Chinese equipment come at a cheaper price, but PowerGrid required long-term service support. With India planning to add 78,700 Mw of power generation capacity during 11th Five-year Plan, and another 100,000 Mw in the 12th Plan, huge investment in transmission will be required for evacuation of electricity. PowerGrid plans to make an investment of over Rs 85,000 crore in nine transmission corridors, in addition to Rs 55,000 crore in the 11th Plan period.
With Chinese companies preferring to work with their own nationals, mainly due to language constraints, undertaking projects here come with a request for employment visas. The Indian government has restrictions on issue of visas to foreign workers in the unskilled and clerical job categories. It requires permission from the ministry of labour. A Chinese national seeking an employment visa in India also requires clearance from the Intelligence Bureau.
The power ministry has so far maintained that banning Chinese equipment in the power sector is no solution since that would delay coming up of new capacity, but a senior executive of a power equipment company maintained that domestic suppliers would be able to meet the demand.