The power ministry will soon make it mandatory for foreign equipment to set up manufacturing units in India if they intend to supply to the country's power sector. Although the guidelines do not specify any country, it is very clear that the move is to snub the growing popularity of Chinese equipment suppliers to Indian power projects. Despite the growing presence in India's power sector, China currently has no manufacturing base in India and this is exactly what the power ministry's policy is aiming at.
Over the past few years, Chinese suppliers like Dong Fang, Shanghai Electric, Sepco have made a mark in Indian private sector projects. It is estimated that in the 11th Plan period, out of the total 78,000 mw that the country has targeted, nearly 18,000 mw will come from Chinese suppliers. Not only are private sector power companies enchanted by the Chinese spell, there is at least one state electricity board that had preferred a Chinese supplier over the traditional favourite, Bharat Heavy Electricals.
What then drives power producers to Chinese suppliers? Two critical aspects: cost effectiveness and timely execution. After all, let us not forget that China has shown enough aggression in its own country. It could add 1,00,000 mw of power capacity in a single year as compared to India that could set up barely 20,000 mw in five years. In other words, China has been 25 times faster! Timely implementation, as a virtue, is certainly deeply ingrained in the Chinese psyche and will naturally reflect in their work - at home and abroad.
Bhel, India's largest supplier of power equipment, is expected to contribute 50-60 per cent to India's capacity addition in the 11th Plan. The company has recently expanded capacity to 10,000 mw per year and is aiming at 15,000 mw in coming years. However, it must be appreciated that capacity augmentation by Indian equipment suppliers and power capacity addition cannot be concurrent exercises; they are sequential. All the efforts the Indian suppliers are putting in to ramp up capacity will be reflected, in the best case, during the 12th Plan period (2012-17). During the 11th Plan, there has to be a buffer and nothing could be better than Chinese suppliers.
It is likely that China will take the policy positively and actually get inspired to set up a manufacturing base in India. Given its aggression, it is a distinct possibility. China has equipment giants and India is a huge market. Dong Fang is twice the size of Bhel, while Harbin Engineering is thrice! How much power capacity will be added in the 11th Plan is anybody's guess, but there will an oversupply of excitement for sure.

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