Govt allows Chinese power gear firms to set up service centres

New Delhi: The Cabinet on Thursday has cleared a proposal to sign a memorandum of understanding (MoU) with China that allows Chinese power equipment manufacturers to set up service centres in India.

Chinese equipment gained popularity because of low costs and cheap financing. Companies such as Reliance Power, Jindal Steel and Power, Haryana Power Generation Corporation, and JSW use Chinese equipment in their plants. Indian power developers have purchased equipment for nearly 61,000 MW from Chinese companies.

During the 11 {+t} {+h} Five-Year Plan (2007-12), equipment for 18,000 MW were already sourced from Chinese suppliers, while another 43,000 MW are under various stages of commissioning during the 12 {+t} {+h} Plan (2012-17) with equipment from China.

“There have been cases where power plants were shut for months due to lack of service network in the country. There have been instances where equipment had to be sent to China for repair and power plants shut for 10 months,” a Power Ministry official said.

Though, currently the law does not restrict foreign equipment providers from setting up a manufacturing and service base here, not many have used this opportunity, as guidelines were not in place.

“The Power Ministry and China’s National Energy Administration are likely to sign a memorandum of understanding (MOU) soon to facilitate setting up Power Equipment Service Centres (PESCs) in the country,” a senior Government official told Business Line.

The MoU could be signed during Prime Minister Manmohan Singh’s visit to China starting October 22.

In September, India and China held talks to improve business ties between the countries. During the meet, India spoke about the need for service maintenance backup for Chinese equipment installed here.

The MoU will only define general ways of co-operation between the parties to establish PESCs. “These will be set up on commercial terms. At the same time, costs and terms of servicing power equipment will be decided by the service centres and the users,” he said while adding that the pact will be valid for five years.

However, setting up a service centre in India would not qualify Chinese companies to supply equipment to the ultra mega power projects (UMPPs).

In August, an Empowered Group of Ministers (eGoM) headed by Defence Minister A. K. Antony decided that those bidding for UMPPs will have to source equipment from domestic manufacturers. This move is bound to help companies such as BHEL, L&T and Bharat Forge-Alstom, as all of them are suffering from lack of fresh orders.