After putting a domestic manufacturing rider in tenders called by central power utilities for supercritical power equipment , the government now wants promoters of all “future” ultra mega power projects (UMPP) to buy equipment from companies who are prepared to give “upfront commitment for progressive indigenisation of technology”.

The directive, based on the feedback from the group of ministers (GoM) headed by finance minister P Chidambaram, has come from Prime Minister Manmohan Singh and is part of an overall drive of the government to give a fillip to domestic manufacturing capabilities of power equipment — especially those based on super critical technology.

The directive also adds that “when such procurement of power is done through tariff based competitive bidding, the benefits of customs duty, excise duty and deemed export under mega power policy should be available to such players.”

Till now, UMPPs were offered to promoters who quoted the lowest tariff and were thereafter free to choose to their equipment suppliers. As cost of power equipment forms a major chunk of the total project cost, these promoters can choose their equipment suppliers keeping in mind the tariff they had quoted for the power plant.

However, with this rider, the promoters shall have to tie up with those suppliers who already have domestic manufacturing capabilities or would have to put in place a process whereby this technology is passed on to Indian companies. This could be in the form of joint ventures or even in the form of setting up a green field manufacturing base in the country.

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