Some 90 km west of Gurgaon, lies Khanpur. The drive into this village in Jhajjar district is picturesque — lush green fields scattered with yellow mustard flowers line both sides of the highway, and brightly painted buildings, temples and trees dot the landscape. Some distance into Khanpur, though, the surroundings change abruptly. Here, the ground has been cleared of all vegetation, truck and heavy equipment tyre marks mar the reddish-brown soil and beyond, in a compound surrounded by dusty trees, huge cement chimneys jut into the sky.
It wasn’t too long ago that Khanpur was just another sleepy village typical of rural India. Now, it’s a power hub for Haryana. In the past four years, two large power projects have been set up to meet the energy demands of the state and adjoining regions. The chimneys are part of these projects — one is a 1,500 MW joint venture between the Delhi and Haryana governments and NTPC, set up especially for the Commonwealth Games. The other — just across the road, literally — is a 1,320 MW plant owned by China Light & Power (CLP).
The Hong Kong company’s plant, which started production in March this year, is one of the few FDI-funded private power projects in the country. That’s not its only claim to fame — CLP India is also among the first few developers to use the latest super-critical technology, which is also used by ultra mega power projects.
Given the importance of the two plants, you’d expect the project site to be abuzz with activity. But nothing much seems to happening — for the past several weeks, both plants have been producing very little electricity. Why? “Shortage of coal”. That’s an important reason but the CLP plant has an additional problem. Its equipment — sourced from Chinese companies Harbin and Dongfang — hasn’t been working as well as it should and one of the two units has had “boiler tube leakage problems”.
Some 240 km north of Khanpur at Yamuna Nagar is another power plant that started production not too long ago. But it’s close to a year since this Haryana government-owned 600 MW plant has produced any electricity — its turbine, bought from Shanghai Electric is damaged and “may” be back in action later this month.
Unfortunately, these aren’t stray incidents. A study of the 1,200 MW Hissar power plant — which has turbines from Shanghai Electric and boilers from Harbin — says that one of the two 600 MW units faced 70 outages between August 2010 and April 2012; after just two years of operation, portions of the turbine rusted and there were dents on critical machine parts. Similarly, a Central Electricity Authority (CEA) report says that two units of Adani Power’s Mundra project (units 5 and 6, each of 660 MW) have faced problems with their boilers, sourced from Harbin. Sajjan Jindal’s Jallipa Kupurdi plant in Rajasthan, too, has had trouble in two units of 135 MW each. The equipment provider? Dongfang Electric from China.
Chinese equipment dominates the Indian power market
Between August and October, one unit of Reliance Power’s 1,200 MW plant at Rosa shut down twice — once on account of payment disputes and once because of boiler tube leakage. The equipment was supplied by Shanghai Electric.
If you’re seeing a trend of faulty Chinese power equipment, you’re not alone. In October 2012, a CEA report concluded that there has been a 10% dip in production levels between FY11 and FY12 in plants that used equipment from Chinese manufacturers. “The PLF [plant load factor, or the actual output of a plant as a percentage of its potential] of China-make units reduced from 72.33% during FY11 to 62.48% during FY12 due to increased forced outages at the units,” the report says.
“We would not like to source even a bolt from China for our power venture,” says Manoj Gaur emphatically. “I’m happier with domestic equipment manufacturers.” The executive chairman of Jaypee Group is walking the talk — equipment for the group’s 1,320 MW plant at Nigrie, Madhya Pradesh, has been sourced from L&T-MHI, which recently started manufacturing power equipment.
While Jaypee and the Tata group have steered clear of Chinese vendors, other players such as Lanco, Adani Power and Reliance opted for equipment manufactured from there. Not surprisingly, then, it’s difficult to get anyone to openly attribute problems to the equipment — these machines cost about Rs.3.5-4 crore per MW on average and no one wants to admit to such a costly mistake. Instead, the official reasons usually cite coal — its lack and poor quality.
The biggest plants in India are losing money as capacity generation drops due to faulty equipment
At the Jhajjar plant, for instance, CLP India MD Rajiv Ranjan Mishra admits that there are “some niggling problems” with the plant but hastens to add that such issues can come up with any plant in the initial years irrespective of the equipment. “Even the Bhel-based plant here is facing leakages,” he adds, something official records concede. The problem of coal, Mishra says, is a serious matter. Not only is the coal of poor quality, it’s also inadequate. CLP India has received only 30-35% of its total requirement from Coal India and one unit shut down for lack of coal. The boiler tube leakages have been repaired, says Mishra, but he can’t check whether the problem has been solved satisfactorily since there isn’t enough coal to run the units.
Passing the buck
Perhaps it is the coal that’s faulty but certainly there’s cause for concern. About 20% of all capacity addition since April 2007 has been on Chinese equipment while orders have been placed with Chinese vendors for 42% of the 90,000 MW of capacity in the pipeline. The influx started around FY06, when the market was flooded with Chinese manufacturers. While domestic producers like Bhel could roll out 10,000-15,000 MW of equipment annually, the likes of Harbin and Shanghai Electric had capacity of 25,000-30,000 MW. And their offer was too good to refuse: 20% cheaper, and easy finance options.
It’s not as if the concerns were not raised about the quality of the equipment and its suitability for Indian power plants then. In 2008, the CEA conducted a study on three plants that used Chinese equipment and concluded that vendors needed to be transparent in providing technical details. Moreover, problems such as leakage were typical in the initial years of operation and plant owners needed time to familiarise themselves with the new equipment.
This time around, the government does seem to be taking notice. Planning Commission member BK Chaturvedi agrees “frequent break down of China-make equipment is an issue”, adding that the government has asked foreign vendors to set up local facilities for spares etc., so that repairs can be undertaken quickly. The CEA, too, sent a team to visit equipment companies in China to sensitise them on the problems being faced by power producers. “We are currently analysing data [from various utilities] to ascertain the problem,” says Manjit Singh, member, CEA. “Once the issue is identified, we will address the problem.”
As it is, in July, the government imposed a 21% duty on imported power equipment ostensibly to boost domestic production, which is likely to impact future orders to Chinese vendors. If quality is an issue, the plants not opting for Chinese-make equipment will be spared outages and expensive repairs. The 40,000-odd MW that’s already planned with Chinese equipment, though, may be powerless to prevent trouble ahead. Literally.