“In a letter written to the Finance Minister last month ahead of the Union Budget, L&T CMD A M Naik expressed concerns over import of Chinese power equipment to India that totaled nearly 8.3 billion dollars, while Chinese taxation model struck down any hopes of Indian exports to China.” (Times Now 27th July 2009)

So, why are we suddenly so dependent on the Chinese power equipment?

One of the reasons can be the variety of options the Chinese provide. China has got technology for every price. With the Indian power sector being opened to the private players after the Electricity Act of 2003 there is a huge need for the power equipments in India. Further most of the private players who are looking to set up a power plant in India are looking for cheaper technology and on time completion. Till now the Indian PSU, Bharat Heavy Electricals Limited, had the monopoly in this sector and was perhaps the only major power equipment supplier in India. But with all its back-logs and more expensive technology it is finding it hard to compete with the Chinese invasion, despite all its experience in the sector.

Further, as Mr. A M Naik pointed out, the Chinese taxation model has struck down any hopes of Indian exports to china, and the life of the Indian manufacturers has become all the more difficult.

The current state of affairs may be attributed to the fact that most of the Indian companies are having a collaboration with companies from the western world and though their technology may be more reliable, they are certainly more costlier than their Chinese counterparts.

Another major problem with the Indian power sector is the standardization of the specifications as each and every client/consultant has their own specifications. This makes it difficult for a company like BHEL to execute its order in time.

So, how did the Chinese reach where they are today?

The answer lies in the fact that in the nineties, China invited all the major companies like Babcock, Alstom, Hitachi and Foster Wheeler and established technology tie-ups for sub-critical boilers. By 2000, they had absorbed the technology and banned all foreign players from participating in domestic market. Again after 2000, when there was a need for supercritical technology, they tied up with the global players and absorbed supercritical boiler technology. The Chinese government ensured that the orders were executed only by Chinese domestic players. After 2005, the Chinese government has banned all units less than 300 MWe. Also the government is ensuring that all new units are supercrtical units.

Sadly, in India, successive governments have lacked the vision to implement such bold steps. Even though companies like BHEL and L&T-MHI have invested heavily in establishing manufacturing capabilities, a number of players continue to embrace cheap borrowed technology from China.

Thus, the Indian foreign ministry has to revise its strategy if it wants to save the Indian manufacturers from the Chinese dragons.