India Rethinks Reliance on China in Power Sector
By AMOL SHARMA
MUNDRA, IndiaIndia is trying to rein in its heavy reliance on Chinese equipment and know-how for the ambitious expansion of its power sector. The shift casts a shadow over what has been a healthy partnership in an often tense relationship between the giant neighbors.
India wants to boost electricity output by 60% in the five-year span ending March 2012 to alleviate severe shortages and help fuel a rapidly growing economy. But it doesn't have enough of its own equipment and engineers to meet that goal, so power companies have looked overseas for help. U.S. and European suppliers are too expensive, but low-cost Chinese contractors are a good fit.
Building India's Power
Chinese companies are now supplying equipment for about 25% of the new power capacity India is adding to its grid, up from almost nothing a few years ago. They have sent thousands of skilled workers to Indian plant sites, some of which boast Chinese chefs, Chinese television and ping pong.
But now India is reining in cooperation with China as it seeks to build up its own manufacturing base to service power plants. The Central Electricity Authority, India's top planning body for power projects, recently asked government-controlled power companies to use Indian equipment on all upcoming big projects.
The Indian government is also considering a plan to tax Chinese power imports. And Prime Minister Manmohan Singh's aides have told power regulators to make sure India has enough spare parts on hand to fix Chinese equipment when it needs repairs, according to a person familiar with the discussions.
"It's better that we depend on our own capabilities rather than depend on those from the outside," Rakesh Nath, chairman of the Central Electricity Authority, said in an interview.
India has also made it tougher for its companies to bring in foreign workers for contract labor, a move that has had a significant impact on the energy sector. Last fall, the government tightened visa regulations in a move that forced at least 3,000 Chinese workers on power projects to leave the country, slowing progress at many plant sites across India.
Then, in December, India put in place strict new limits so that no more than 1% of a project's work force can be foreign nationals, with a ceiling of 40 workers for power projects. India's Ministry of External Affairs declined to comment on the new restrictions.
China's Ministry of External Affairs has "expressed concerns to India on many occasions" about the visa issue, a ministry spokesman said. "In order to implement these [power] projects successfully they need to have the necessary technicians from China."
Shandong Electric Power Construction Corp., or Sepco, one of the most active Chinese power-plant builders in India, had 300 Chinese workers last year helping to build a $4 billion plant in the small town of Mundra, on the northwestern coast of Gujarat state. About 100 had to leave last fall after the Indian government said business visas weren't valid for such projects.
Some workers are applying for re-entry on employment visas but are struggling. Sepco has scrapped its original plan of ramping up to more than 1,000 people in Mundra.
With the limit of 40 workers per project, "it will be very difficult to make enough progress on projects," said Li Wei Wei, a Sepco translator who has helped colleagues deal with immigration issues.
The Indian government says restricting Chinese imports will give domestic manufacturers a chance to ramp up production.
The country's main plant supplier, Bharat Heavy Electricals Ltd., has the means to service only about 50% of the power capacity India is planning to add every year, but it plans to double its production to service 20,000 megawatts of power by 2012. Other companies are entering the power-equipment market, like a planned joint venture of Alstom SA of France and India's Bharat Forge Ltd.
Indian power-generating companies such as Adani Group, Reliance Power Ltd. and KSK Energy Ventures Ltd. haven't picked just Chinese vendors because of their discount prices. Chinese engineers have plenty of experience building coal-fired plants, India's main source of power. China generates over 80,000 megawatts of new power capacity a year, about 20 times as much as India.
The arrangement also makes sense for China, which has excess capacity to sell. "India is developing very quickly and badly needs power plants, so we Chinese are here to help," said Wang Zhexian, a senior engineer at Sepco, which was hired by Adani Group to build a coal-fired plant in Mundra. "They've never worked on this kind of plant. It is important that we teach the Indian workers."
The experience hasn't always been good. Three Sepco employees were arrested early this year in connection with the collapse of an 820-foot chimney in September at a power plant the company was building in the heartland state of Chhattisgarh. The incident left 40 people dead. The Chinese workers' plea for bail was rejected and they are in jail awaiting trial, according to the public prosecutor in the case. The workers have yet to enter a plea. Efforts to obtain Sepco comment were unsuccessful.
....^^guess who responsible for the collapse?
But overall, Indian executives say Chinese workers are bringing a critical edge that is now at risk. D.P. Joshi, the Adani executive in charge of construction in Mundra, says Chinese engineers have experience building modern plants based on "supercritical" technology, where elevated steam pressure creates a more efficient thermal cycle and lowers costs. And the Chinese firms, he said, can be counted on to deliver materials and engineers quickly, whereas Bharat Heavy Electricals is overbooked.
"Any private playerthe one thing he wants is delivery. He wants it on time if he's putting up so much money," Mr. Joshi said. If India is to stay on track with its plans, equipment and skilled manpower "has to come from the outside, and it has to come fast."
Mr. Nath of the Central Electricity Authority acknowledges that Chinese expertise has been important. "We don't have that amount of skilled manpower in the country," he said. "That's something we'll have to build up."
Adani, a conglomerate with revenue of $5.7 billion and interests ranging from precious metals trading to vegetable oil, plans to produce 20,000 megawatts of new generating capacity by 2020 through coal-fired plants as well as gas and renewable projects. The Mundra plant, which is being built on 700 acres of barren land in the arid Kutch region of Gujarat state, is scheduled to be completed by 2012.
It will generate 4,620 megawatts of power to help alleviate shortages in western and northern India. When it came to awarding supplier contracts, the company went with Chinese vendors almost exclusively. Sepco was picked as the lead contractor in September 2007. Indian contractors, including Larsen & Toubro Ltd., are providing thousands of construction workers who take orders from the Chinese firms.
Workers broke ground at Mundra in early 2008 and the first segment of the planta 330-megawatt unitwas commissioned in May 2009. At its plant site here, Adani created a special Chinese housing "colony." At the dining hall, a master chef serves home-style dishes like pork dumplings and red-bean bread, while Chinese TV plays in the background. Workers unwind with a game of ping pong or badminton.
Indian and Chinese workers expressed some frustration over differences in the way their cultures approach work. "You give me one workI will try to finish it in the shortest time," said Yuan Lei, a 25-year-old who helps write Sepco's agreements with subcontractors. "But for Indian people they may first [say] 'Let's take tea! Let's enjoy!' Maybe tomorrow they will finish this work."
For their part, some of the Indian workers say they can't keep up with the Chinese pace. They are "so quick compared to Indianso fast," said Nilesh Patel, an Indian construction worker at the site.
Still, for some, a strong mutual affection is developing. Last year, a woman from Sepco married an Indian contract engineer. Adani executives keep a Chinese calendar so they are prepared for big events like the coming Spring Festival, or Chinese New Year.
Mr. Joshi says Adani hopes to avoid delays due to the new visa restrictions by having Sepco and other contractors train Indian engineers. In May, Adani is sending 36 of its people to China to study supercritical boiler technology.
The experience of working alongside the Chinese will help India bolster its domestic power sector, said Mr. Wang, the Sepco manager.
"After they've worked here they will have more experience, and their efficiency will improve," he said. "In a few years, they will have their own [supercritical] plants built by their own people."
Arlene Chang and Gao Sen contributed to this article.
Write to Amol Sharma at email@example.com