Government Pushes $33B Coal Equipment Orders to Boost Power

The Indian government has urged power companies to order equipment worth $33 billion this year, according to sources within the administration. This directive comes as India grapples with rising electricity demand, driven by rapid economic growth and increased instances of heatwaves, which have exacerbated the power supply shortfall.

This significant push for equipment procurement is expected to result in an unprecedented level of tendering activity within a single year, involving major state-run power firms like NTPC and SJVN, as well as private sector players such as Adani Power and Essar Power. The initiative aims to add 31 gigawatts (GW) of coal-fired power capacity over the next five to six years, marking a substantial escalation from the usual annual orders of 2-3 GW, and even last year’s higher-than-average 10 GW. The expedited timeline for these equipment orders was discussed in a recent meeting led by Power Minister Manohar Lal, reflecting the government’s proactive approach in addressing the urgent need for enhanced power generation capabilities. This strategy is particularly ambitious, considering India’s historical procurement trends and the current energy demand landscape.

India’s power demand has surged to unprecedented levels in the post-pandemic period, spurred by the fastest rate of economic growth among major economies and increased heatwave occurrences. In June, the country faced its most severe power shortfall in 14 years, necessitating emergency measures such as deferring planned plant maintenance and mandating the operation of plants using imported coal and power to avert night-time blackouts. Industry insiders indicate that Bharat Heavy Electricals Limited (BHEL) is poised to secure the majority of these new equipment contracts. Meanwhile, Larsen & Toubro (L&T), the other significant power equipment manufacturer in the Indian market, did not participate in most of the bids last year. The Power Ministry, BHEL, Adani, NTPC, SJVN, and L&T have yet to comment on this development.

This latest push for coal power equipment recalls the last major procurement phase in 2009-10, when orders for about 20 GW were placed, with Chinese companies capturing a significant share. However, since 2020, India has imposed regulatory restrictions on contracts with companies from neighbouring countries, including China, to safeguard national interests. The fast-tracking of coal-fired power plants since late last year underscores India’s ongoing struggle to meet its power requirements, despite the nation’s commitment to reducing its carbon footprint as the world’s third-largest greenhouse gas emitter. In March, reports indicated that private Indian firms have shown interest in developing at least 10 GW of new coal-fired capacity over the next decade, ending a six-year hiatus in substantial private sector investment in the coal power sector.