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Govt to audit quality of Chinese equipment
May, 28th 2008

The audit comes as rivals to Chinese power equipment manufacturers, mainly Bhel, have seen Chinese suppliers make deep inroads into the market here

Worried by concerns raised by an Indian competitor about the alleged poor quality of power generation equipment supplied by Chinese manufacturers such as Dongfang Electric Corp., Shanghai Electric and Harbin Power Equipment Co. Ltd, the Central Electricity Authority, or CEA, Indias apex power sector planning body, has formed an internal group to conduct a technical audit of such equipment.

There have been concerns raised by Bharat Heavy Electricals Ltd regarding the quality of the power generation equipment supplied by the Chinese manufacturers to India. One of the turbines supplied by Dongfang for the West Bengal Power Development Corp.s 300MW Sagardighi project has failed. Some of these concerns assume significance as equipment orders for about 20,000MW have been placed with the Chinese, said a CEA official who didnt want to be named.

Quality has always been an issue with the Chinese equipment, claims a Bhel executive who didnt want to be named.

The audit comes as rivals to Chinese power equipment manufacturers, mainly Bhel, have seen Chinese suppliers make deep inroads into the market here, riding on the back of Indias huge appetite for power generation.

Indeed, with manufacturers in India struggling to execute projects, Indian power project developers have been increasingly placing the order for the equipment with the Chinese, who also have a cost advantage. As Indias main power equipment supplier, Bhel, with an order book of Rs90,000 crore, is struggling to accommodate new business. Indias equipment needs as of now are estimated at Rs3 trillion.

Wen Ya, Dongfangs chief representative in India, defended the quality of equipment supplied by his company, and said: I do not agree with this point of view.

We are not new in the business of manufacturing power generation equipment, but have been doing this for a long time. Not only do we cater to the domestic demand in China, but have also been supplying equipment to other overseas markets as well. If our equipment were of low quality, this would not have been possible, he said.

As for the turbine failure at Sagardighi, Wen said: We do not know the reason behind the failure. Our experts are already on the site and are working to resolve the issue. We are committed to provide the best service to our customers.

Dongfang has a manufacturing capacity of 31,000MW per year. The company manufactures equipment for large hydroelectric power stations, thermal power stations and nuclear power stations. It also routinely bids for contracts for setting up power generation stations and has taken up power project contracts in more than 10 countries.

Questions emailed to Shanghai Electric and Harbin Power went unanswered.
The review comes on the heels of the Indian government initiating plans to restrict overseas equipment manufacturers from bidding for Indian projects unless they have a manufacturing base in India to increase domestic power generation equipment manufacturing capacity.
India has drawn up plans to generate 78,577MW of power in the next five years and has farmed out orders to other overseas suppliers as well. Equipment for about 20,000MW has been ordered from Chinese firms such as Shanghai Electric and Harbin Power, but nearly 40% of the order is sitting with Dongfang.

There has been a general concern about whether the Chinese machinery compromises on quality as it is competitively priced, said Kuljit Singh, a partner at accounting firm Ernst and Young. This audit is a good thing and will prove/disapprove this notion.

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