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Restricting China in India’s power transmission

The Union power ministry, according to reliable media reports, is planning to issue a note that seeks to restrict China’s involvement in the Indian power sector. The reports further suggest that restrictions will be imposed in the power transmission sector to start with, and will be extended to power generation and power distribution subsequently.

The objective of the policy is to maintain the principle of reciprocity. China, it should be noted, does not allow Indian companies in its power sector. While there are other countries that also disallow Indian participation, China is significant because of its widespread involvement in the Indian power sector.

When it comes to a Chinese, or any foreign entity for that matter, there are two ways in which it could associate with the Indian power sector. It could either be an equipment supplier or it could be a developer. In the case of a developer, the foreign (Chinese) entity will own equity in the power project, be in the field of generation, transmission or distribution, and will therefore share the risk of the project. When it plays the role of an equipment supplier, there is no equity stake. An equipment supplier can, at the most, become an EPC contractor and perhaps undertake a concomitant operations & maintenance (O&M) contract.

Within equipment suppliers, there are two classes. The first is one that has domestic manufacturing facilities in India, and the second is where the supplier caters to the Indian market through exports from the country of origin.

Thus, we have three broad categories in which a Chinese supplier could cater to the Indian power sector – developer, equipment supplier without local manufacturing facilities and equipment supplier with local presence.

Gauging the impact

Let us gauge the impact of the proposed restriction in the power transmission sector. So far, there are no Chinese developers of power transmission lines. This means that no Chinese company owns and operates transmission lines in India, as yet. Ownership and management of power transmission lines is possible under the under the BOOT/BOOM model. All the same, it is learnt that CLP (incidentally the only independent power producer in India, of Chinese origin) has bid for some interregional lines offered under the tariff-based competitive bidding route. CLP India had bid for three lines but did not secure any. Very recently, CLP India in association with China Southern Power Grid International (CSGI) has bid for three interregional lines, the results of which are awaited. The entry of China as a potential developer of power transmission lines in India was also discussed in a Parliament session earlier this year. Barring this case, there is no other Chinese company that has evinced interested in India’s power transmission sector, in the capacity of a developer.

When it comes to equipment used in the power transmission sector, the proposed ban could have some impact. India’s power transmission infrastructure is gradually moving to extra high voltage levels, typically 765kV. Till around five years ago, power utilities (both Central and state) made large-scale imports of 765kV gear, like transformers and reactors. However, today, local manufacturing capabilities of 765kV equipment have improved thereby lowering the reliance on Chinese equipment. However, there are some items like insulators are imported on a large scale from China as they are available at a very low cost. It is well known that Indian insulator companies have been hurt badly by cheap imports, for several years now.

China as a local player

It is also interesting to note that China is taking the Indian power transmission sector seriously and has even set up local manufacturing facilities. BTW, TBEA and Hyosung are some Chinese companies that have started operations in India through local plants, in the field of EHV power transformers, reactors, switchgear, etc. The Indian manufacturing fraternity, is should be mentioned, has not objected to Chinese companies setting up facilities in India. Their contention has always been to put a check on cheap imports from China.

Though details of the proposed restrictions are not available, it remains to be seen if India actually prohibits Chinese companies from setting up manufacturing facilities in India. Given that India currently permits 100 per cent FDI in the electrical equipment sector, and is also encouraging the “Make in India” campaign, how deftly it deals with the sensitive issue remains to be seen.

The final picture

Since the proposed restrictions on China in the power transmission sector have not yet been spelt out, the final picture cannot be painted. In summary, there will little impact from the “developer” angle. By and large, Chinese companies are not interested in owning and managing transmission lines. It is unlikely that Chinese equipment suppliers that have already set up shop in India will come under the ambit of the proposed restrictions. What could be done is to check imports of power transmission-related equipment. Here, India will be affected but fortunately the dependence on Chinese equipment today is far lesser than what it was, say, five years ago.

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China’s Role In Power Transmission Raises Concern

venu by — June 6, 2017 in Power Transmission 0
Multiple certifications needs to be eliminated

Distribution transformer manufacturers are troubled by the need to comply with guidelines issued by two agencies—BEE and BIS.

Of late, the distribution transformer industry has been in the news on the issue of product quality certification by two agencies Bureau of Indian Standards (BIS) and Bureau of Energy Efficiency (BEE). The matter needs to be understood in some detail.

It all started when BEE extended its star labeling programme to include distribution transformers; this was around January 2009. Under BEE’s programme, an electrical equipment or appliance is designated with “stars” (from 1 to 5) depending on the energy efficiency of the equipment. A 5-star rating suggests highest energy efficiency, while a 1-star rating stands for lowest. A distribution transformer was required to have a minimum of 1-star label. However, when these guidelines came out, distribution transformers (DT) corresponding to 1-star and 2-star efficiency were not being manufactured as the industry was by itself technologically evolved. A 3-star label was therefore considered as the minimum norm. This has since progressed to 4-star. In other words, DTs today have either a 4-star or a 5-star label.

BEE versus BIS

Meanwhile, BIS, after a detailed study, revised its IS1180 standard to incorporate features of energy efficiency. Accordingly, what was 3-star under the BEE guideline came to be known as Level-1, 4-star was Level-2 and 5-star was Level-3. This revised guideline was followed by all DT manufacturers and was considered comprehensive, in terms of both product quality and energy efficiency.

Recently, it is learnt that BEE has independently revised its guidelines with a view to introducing more energy efficiency. Accordingly, what was Level-2 under IS1180 has now become the “New Level-1”, the Level-3 under IS1180 has become “New Level-2”. It is further learnt that BEE has revised guidelines without extensive discussions with manufacturers and other stakeholders. This has peeved manufacturers of DTs.

Common objective

Transformers that are affected by the BIS and BEE certification are those up to 2.5MVA in the 11kV, 22kV and 33kV class. Such equipment is termed as a distribution transformer and is used in the last-mile of the flow of electricity from the power generation source to the point of consumption. Distribution transformers of these specifications find widespread application in rural electrification.

The industry feels that the ultimate objective of both BIS and BEE is to ensure minimum energy efficiency of distribution transformers. Getting independent certification from both BEE and BIS is both costly and time consuming.  As of now, the new BEE guideline has been put on hold for six months but a permanent solution to this duality of certification still eludes.

venu by — May 9, 2017 in Power Distribution 0