In the Blue Corner: “…Chinese companies were dumping their equipment, be it transformers or reactors, here. In the absence of an after-sales service infrastructure, it is very risky. Our requirement is so huge. While their rates are very cheap, there is a quality concern,” S.K. Chaturvedi, (then) PowerGrid chairman, May 26, 2010, Live Mint
In the Red Corner: In 2012 to 2017, India has started construction of 76,000 MW of installed power, of which over 60 per cent of the equipment may be provided by Chinese manufacturers. India is the largest overseas market of Beijing’s top companies. 12 power station construction projects, accounting for half of Chinese exports of electrical equipment could be headed to India.
A three-member enquiry comprising AS Bakshi, chairman, Central Electricity Authority, AM Nayak, chairman, PowerGrid, and SK Soonee, chairman, Power Systems Operating Company (the company spearheads transmission activities in the Northern Grid) has been tasked to tell Power Minister Sushil Shinde why North India woke up with the massive outage Monday. The crisis has merited imports from Bhutan and cancellation of the Parliamentary Consultative Committee meeting (jaunt?) at the feet of Lord Balaji in Tirupathi.
Let’s hope the three men tell the truth as it is. Air brushing with technical relevant to just one snag and/or accusing client states for “over drawing,” as Shinde already has, is only half the story. It is equally true that we are, pardon my French, saddling our future generations with crappy equipment, with crappier service. Do we even know what’s coming next?
Here, I don’t mean to be impolite to the Chinese worker. Nor do I covet being enemies with the powerful friends her employers have made in India. It’s just that I want us to be assured that the unholy version of Hindi-Chini Bhai-Bhai won’t snow ball into a larger security threat.
Before the fates of train passengers in Tamil Nadu and Abhinav Bindra at the Olympics take over and we switch off to the power problem now that our ACs are cooling - let it be told that a cartel comprising Chinese manufacturers of crappy equipment, banks that subsidize their operations in defiance of China’s World Trade Organization commitments**, and, ironically, some of India’s top corporates in the sector, hasn’t connived to saddle us with sub-standard equipment which will power more outages like Monday morning.
Indeed, India is no banana republic to drown itself in the avalanche from China. But trust no less than a National Security Advisor (NSA) aide to admit earlier this month that the government has been under severe pressure from domestic Indian companies to dhobi-mark deals with their Chinese partners. Pragmatic as Team NSA is to make virtue out of necessity and rationalize India’s abject dependence on Chinese power generation and transmission equipment, the aide called it: India’s market weapon, a counter-force that we shall have, in case the People’s Land Army (PLA) decides to get on with the unfinished business of 1962.
The NSA aide’s argument hinges on the fact that a) the Chinese players will prevail on their government not to screw up India’s happiness and b) Indian manufacturers won’t simply reduce themselves to being petty traders and Sino-lobbyists, but, instead, they’ll do the dull and boring task of indigenization. Indeed, when push comes to shove, they won’t leave Bharat Mata to wait for Chinese spares to fight the PLA with torches on the Northern Frontier (even those might have Chinese batteries, any way!).
The NSA aide’s third assumption is that none of this equipment, including the wares we import in telecom, can be switched off by a “Grand Remote” in the hands of a general in the PLA.
A brief, item-wise counter to the rationale is: a) are the doves for Sino-Indian “interdependence” failing to warn us that when the chips are down, Chinese toys will prove different than Chinese telecom? We can get as many Ganeshas and Diwali fire-crackers from their industrial complex; but do we expect their state-owned companies, unlike others from US, Europe and Japan, to fight the PLA on our behalf? Surely not!
Now, point b). Indian companies, and I refer here to some of our most reputed folks, are happy doing trading and SKD assemblies without the headaches of domestic manufacturing. Those who do get their hands dirty are creating manufacturing bases in China itself!
The third dimension of a “Grand Remote” borders on the paranoid, but who knows, given Beijing’s determination to fix India (and Japan++) within the Regional Asian box, and the genius of our own intelligence folks in dealing with them (just last week our guys in Beijing allowed the unsuspecting ambassador to inaugurate an exhibition showcasing India’s sordid human rights record, albeit Narendra Modi’s! So much for our ability to sniff ahead of time.)
It is useful here to turn a page of recent history and repeat what Nayak’s predecessor at PowerGrid, SK Chaturvedi, had to say:
“Earlier, Chinese companies were dumping their equipment, be it transformers or reactors, here. In the absence of an after-sales service infrastructure, it is very risky. Our requirement is so huge. While their rates are very cheap, there is a quality concern.
“To overcome the concerns, we are insisting that they either form a joint venture or give an undertaking that within three years, the vendor will start manufacturing equipment in India,” Chaturvedi added, hurting China’s largest manufacturer of high-voltage transformers, Tebian Electric Apparatus Stock Co. Ltd (TBEA), which has been a major supplier of transformers and reactors to the Indian transmission sector. High-voltage transformers are used to pump up voltage or to bring it down for electricity transfer across long distances.
“This (PGCIL’s move) will severely limit the (ability of) Chinese firms such as TBEA to bid for tenders in India unless they have a domestic manufacturing,” experts were quoted by Live Mint. Questions emailed by the paper to TBEA had remained unanswered. For a while, TBEA flirted with Bharat Heavy Electricals Ltd (Bhel), but predictably proposal did not work out.
Your columnist was told by a former power secretary, on condition that he can’t be named, that Chinese manufacturers offer only “paper guarantees”; a repair team is dispatched from home, and no prizes for guessing, “their paper work is so poor that they don’t even get a visa!”
Around 60% of the investment for setting up transmission infrastructure India is setting up goes towards equipment.
Some other firms that supply equipment in the high-voltage segment are Siemens AG, ABB Ltd, Areva SA and Bhel. State-run NTPC Ltd, India’s largest power supplier, has already made domestic manufacturing a pre-qualification criteria for companies to bid for its equipment tenders.
Akin to bolting the barn when the dragon has bolted, our power babus just a week back slapped 21% duty on imports of power equipment, mainly to protect domestic companies from cheap (and crappy!) Chinese shipments. This meant 5% basic customs duty, 12% counter-veiling duty and 4% special additional duty on import of power gear.
The idea is to provide a level-playing field to domestic manufacturers such as BHEL and Larsen & Toubro against cheap imports, despite the obvious implication of delays Indian majors will create in honouring the order book.
Meanwhile, private power generation companies have been ganging up. "It will increase the cost of power. The government has only gone by the protection of domestic equipment makers. They have not really addressed the concerns of private power generation companies," Association of Power Producers (APP) director General Ashok Khurana has been saying.
The APP view is backed by ambivalence from the CEA. The CEA has stepped in the generation sector, curtailing Shanghai Boiler Works, an Alstom JV partner in China, to start flooding the Indian market, after BHEL (Alstom’s partner in India!) protested and Alstom concurred. But thereon it gave a clean chit to Chinese quality, but said servicing was an issue.
Now that he has to report back to Mr Shinde, the CEA chairman might want to call up the neighbouring Ceylon Electricity Board. Powered by Chinese equipment , Sri Lanka is reeling in the 5th outage since March thanks to its flagship Norocholai plant.
Tail Piece: Question on my Twitter: If India is unsafe, isn’t Washington in the same boat? Ans: Please check the quantity of T-Bills that Beijing has at stake in the US Treasury.
That’s true “interdependence.”
**Statement of the United States Trade Representative (USTR) on wind energy equipment: “Because of China’s inadequate transparency, it has taken significant investigatory efforts by the United States Government, working with industry and workers, to uncover the subsidies that the USTR has successfully challenged at the WTO. Under WTO rules, China is obligated to submit information about all of its subsidy programs on a regular basis. This information is required of all WTO Members so that countries may assess the nature and extent of subsidy programs. Despite this obligation, China never notified the WTO of the wind power equipment subsidies challenged in this WTO dispute. Similarly, China failed to submit notifications about dozens of subsidies challenged in the two prior disputes. In fact, China has submitted only one subsidies notification since becoming a WTO Member in December 2001. That notification took place more than five years ago and was noticeably incomplete. The obligations of WTO Members to submit notifications about their subsidies are set forth in Article 25 of the Agreement on Subsidies and Countervailing Measures (SCM Agreement.)
“This lack of transparency hinders the efforts of WTO Members to collectively ensure that each government is playing by the rules. The United States would prefer not to resort to WTO challenges but we will do so to hold China accountable and to enforce the rules on illegal subsidies. Even as we announce our success in this dispute, it is past time for China to be transparent about its subsidy programs, and that includes meeting its notification obligations like other WTO Members. China is the second largest trader at the WTO, and it is simply not acceptable that China continues to evade its transparency commitments,” (USTR) Ambassador Ron Kirk said.
China, on its part, has filed WTO cases challenging US countervailing measures against Chinese exports worth nearly $7.3 billion, widening a conflict between the world's two largest economies. The cases, covering US anti-subsidy tariffs on 22 Chinese goods including steel, paper and solar cells, come as a weakening global economy is fueling trade frictions.
++What is China going to do with 5,000 tsubo — about four acres — of land in Niigata City? Build a new consulate general, it says. But that seems like an awful lot for a consulate in a regional city whose main activity since it initially opened has been issuance of commercial visas.
China's acquisition of such a large plot of land — a third again larger than its embassy in Tokyo — is raising suspicions. Masahisa Sato, a member of the Diet's House of Councilors and formerly an officer in the Ground Self-Defense Force, told Japan’s Shukan Post (June 15) that China two years ago passed a military mobilization law that obliges all citizens, including those living abroad, to serve the nation in time of war.
One possible explanation for the large land acquisition is that Niigata's future importance to China is expected to increase significantly, since the city is situated in a straight line across the Sea of Japan from Rajin Port in northeast North Korea, where China has obtained extensive concessions giving its commercial fleet ice-free, year-round access in the Sea of Japan and beyond that, to the Arctic via the La Perouse (Soya) Strait.
Meanwhile on May 31, the public security division of the Tokyo Metropolitan Police Department charged Li Chunguang, a 45-year-old secretary in the economic section of the Chinese embassy in Tokyo, with violation of the alien registration law.
Li, reports Japan’s Shukan Ashai (June 15), was under suspicion for using a forged identity to open one, or possibly several bank accounts for business interests that had nothing to do with his job at the embassy. But Li has a background in military intelligence, and as word spread of his personal contacts with high-ranking members of the ruling Democratic Party of Japan, the words "spy scandal" soon surfaced in the newspapers.
Li made a hurried return to China to avoid the police request to appear for questioning.