We have a long way to go," observed Praful Patel,
Union ministry for heavy industries and public
enterprises, summarizing the achievement of the
Indian power sector. He was speaking at the annual
convention of Indian Electrical & Electronics
Manufacturers' Association (IEEMA) in Mumbai. Patel
dwelt on a range of issues including Plan targets, state of the
power equipment industry and the financial health of
power utilities.
Regarding power equipment, the minister said that the
growing phenomenon of imports of equipment from China
was a serious issue. Patel observed that the quality of imported
equipment, especially from China, is
suspect. He alluded to receiving
reports to this effect from
independent power producers.
While admitting that such
equipment could come cheap, "it has
not passed the test of time," he noted.
Bharat Heavy Electricals Ltd and the
other emerging crop of equipment
suppliers are bound to feel the heat of
Chinese competition, he noted,
adding that the Indian power
equipment industry needs to
produce the best equipment at the most affordable price. The
minister assured that the government was in serious interministerial
discussions on how to tackle the growing
quantum of power equipment imported from China.
All the same, Patel admitted that domestic producers will
have to face the challenges posed by imported equipment.
"In an era of free economy, it is not easy for governments to
put a blanket ban on imports, because we are equally keen
that our products are exported globally."
In an independent development, a recently workshop
conducted by the National Security Council Secretariat
(NSCS) on India-China Trade and Economic Relations, in
consultation with the Commerce Ministry, brought to light
that increasing presence of Chinese equipment
manufacturers in the power sector can gravely hamper the
domestic players in the business. In the discussions, under the
chairmanship of the NSCS and Commerce Secretary, it was
pointed out that imports of Chinese boilers and generators are
increasing in the power sector consistently. It is expected that
in the XI and XII Plan periods, coal-fired units supplied by
China would account for one-third of the total.
The IEEMA conference also saw the release of a report
"Indian Electrical Equipment Industry Mission Plan 2012-
2022: Base Plan Document," prepared by Ernst & Young for
IEEMA. The document charts a roadmap for the Indian
power equipment industry in achieving the target of
achieving a size of $100 billion (including exports) by 2020
from the current $24 billion. In his presentation, Rajiv
Goyal, Director, E&Y, said that the power generation
equipment market is estimated to grow to around $30
billion by 2020 from $5.7 billion now and the T&D
equipment market was expected to reach $70 billion from
the current $18.5 billion.
The mission plan touches on three broad aspects -
enhancement of the electrical equipment (EE) industry,
increasing exports market share and converting latent
demand into real demand. On the first front, Goyal noted
that the EE industry could be enhancement through several
measuring including boosting the R&D expenditure,
improving manpower resources and making the country selfreliant
in critical inputs that are currently imported. Goyal
said that India's EE sector spends only about 1 per cent of its
sales turnover on R&D, as against the global average of 5 per
cent. On the critical inputs side, Goyal cited the case of
CRGO steel, a key raw material used in the manufacture of
transformers, which is almost entirely imported today.
Domestic facilities need to built soon, Goyal observed, given
that domestic the demand for CRGO steel is likely to shoot
up from 2.5 lakh tonnes per year now to around 8 lakh tonnes
per year by 2010.
Giving an overview the plan document implementation,
the E&Y top official noted that the final version will be
released on March 26, 2012. On each of the 14 action plan
subcomponents, a working group would be created. A project
management review meeting will be held every month to
review the progress, Goyal said.
Focus on Generation: Praful Patel accepted that power
sector reforms have concentrated mainly on the power
generation sphere, with scant attention to the T&D side. In
1991, when the reforms process was taken up, there was lot
of emphasis on the power generation side. "We did not go in
the next generation of reforms, which is T&D," he said,
admitting, "In fact, we have still not been to do much of T&D. I have no hesitation in acknowledging that this (T&D)
is an important area of concern."
Power generation project too still have their share of
worries, arising from land acquisition, clearances,
availability of power equipment, etc. On the subject of
environmental clearances, Patel noted that the country
cannot be "over-enthusiastic" about environmental issues.
"We need to balance the needs of a growing economy and
concerns about the environment." On the issue of nuclear
power plants, which has spawned much of the environmentrelated
debate, Patel said that as the country enhances its
power generation portfolio, there will be a big basket of fuel
sources and nuclear cannot be ignored. "Thermal will remain
as the backbone of India's power generation capacity but we
will have to make sure that other forms of power generation
are not neglected either." The minister also noted that India
will continue to focus on renewable energy sources, mainly
wind and solar.
Plan Achievement: The ministry admitted that the country
has consistently failed to meet its five-year Plan targets in the
power sector. For the ongoing XI Plan period (ending March
2012), the original target for new power generation capacity
was around 1 lakh mw. Speaking of the likely achievement,
Patel said, "I don't think we would be crossing 60,000 mw or
so." The minister also accepted that under-achievement has
been observed in other infrastructure segments as well, and
not just in the power sector. "As far as Plan target achievement
is concerned, there have been slippages. But if we go in that
area of debate, will have to go beyond the power sector," he
noted. On the government's planning approach, the minister
said that too much time in India is spent on debating the past.
This leaves the country with serious mismatches between
achievement and targets. "Many infrastructure projects are
not good for today - they were good for yesterday, leave alone
for the future," the minister observed, attracting spontaneous
laughter fom the large gathering.
Power Affordability: An important aspect that Patel
touched upon was the purchasing ability of the electric
consumer-a subject that he claimed rarely comes up in
power sector-related debate. The main reason why power
distribution utilities are in bad financial health was that
the average consumer cannot afford to buy power even at
the generation cost. The financial health of the power
sector depends on the consumer who is not in the best of
position to pay for that cost of power, he remarked.
Industrial consumers end up in paying high rates for
power because they are subsidizing for power sold to
socio-economically weaker sections of society. Patel
therefore observed that a vicious cycle was being created
in the power sector. Power is an enabler of economic
growth and it is this economic growth that will
ultimately help consumers pay for the power purchased.
"100 per cent of Indians will need power but only 50 per
cent of the people will be able to afford the price. The
challenge is — how can we produce the power effectively
and how can we absorb the cost equally effectively?"
he summarized.
Government Interface: In his opening remarks, Praful
Patel said that the interaction with government agencies in
the power sector is inevitable. He explained that power is a
public utility and whenever one deals with "public" goods,
the government must step in as it represents the public. He
however accepted that the interface between private sector
equipment and service providers with the government
could be made simpler and more user-friendly. Drawing a
contrast with the information technology (IT) industry
that did well without government support, the power
sector-generation, equipment and allied industries-has seen
much government interaction, he observed. In a lightveined
remark that drew roars of laughter and applause,
Patel quipped, "I would be the happiest person if this
industry grows in spite of the government!"