The Central Electricity Authority (CEA) has requested utilities
to ensure that they follow the advisory mandating the use of domestic
materials and equipment in government projects. Utilities in various states
were found flouting
the advisory guidelines issued by the CEA for domestic competitive bidding.
In May this year, the
an advisory pertaining to the procurement of equipment and material for
domestically funded projects through the Ministry of Power (MoP), Central Public
Sector Undertakings (CPSUs), and projects funded by Power Finance Corporation
(PFC), Rural Electrification Corporation (REC) and state power utilities.
In the advisory, the CEA had mandated:
- In domestically funded projects of the MoP, CPSUs,
PFC, REC and state power utilities, the procurement of equipment and material
should be done locally through local competitive bidding. If in some cases, an international
competitive bidding process is to be used, the prices quoted should be in
Indian Rupees to create a level playing field.
- If domestic manufacturers are not present, then
foreign manufacturers and suppliers can participate in the tenders, as long as they
form a joint venture (JV) or consortium with an Indian bidder. In these cases,
the foreign manufacturers are required to set up a manufacturing facility in
- If foreign manufacturers are allowed to
participate in the tenders, they must produce a performance certificate from an
end user in a country different from where the product was manufactured, in
support of the satisfactory operation of the product offered, for more than two
- The PFC and REC should ensure that a transparent
bidding process is followed for all central government funded programs as well
as programs funded by PFC and REC.
domestic manufacturing sector is in the nascent stage, and the current World
Trade Organization (WTO) ruling stating that India’s
localization rules discriminate against U.S. manufacturers has led to removal
of the domestic content requirement (DCR) category. In light of these
developments the CEA has to enforce its guidelines or the manufacturing sector
will not be able to compete in the industry in the coming years,” commented an official at the CEA. These
guidelines also allow for foreign investment in the Indian manufacturing sector.
The government can still mandate use of domestic materials
and equipment if used on government properties and projects completely funded
by the government or its dependent agencies. This is one of the ways to help
domestic manufacturers. In most auctions, developers seldom use indigenous
equipment and materials due to higher costs. The CEA has not released the names
of the utilities that are not following the advice and “this is a first warning” to
serve as a reminder, stated the official.
"This is an example of what happens when there is
interference with the free markets. Making utilities pay more to subsidize
local manufacturers (when more economical options are available) might benefit
local manufacturers but not utilities who are already debt ridden. This is also
the reason why interest in DCR solar project tenders was muted,” said Raj Prabhu, CEO of Mercom