India reportedly urges utilities to order $33 billion in equipment this year

India Pushes for $33 Billion Equipment Orders to Meet Electricity Demands

India has directed power companies to procure equipment worth $33 billion this year in a bid to swiftly expand coal-fired power capacity. This measure is intended to address the sharp rise in electricity demand, according to two government officials. The initiative will lead to record tendering by major power firms, both state-run and private, to add 31 gigawatts (GW) within the next 5-6 years.

Typically, companies decide the timing of such tendering. However, this accelerated approach was discussed in a recent meeting held by Power Minister Manohar Lal, following the establishment of Prime Minister Narendra Modi's new cabinet. This strategy aims to significantly boost capacity compared to previous years, where the country ordered equipment for about 2-3 GW annually, except last year's 10 GW order.

Economic Growth and Power Demand

Since the COVID-19 pandemic, India has experienced record-high power demand, fueled by rapid economic growth and more frequent heatwaves. The nation faced its most significant power shortfall in 14 years this June, forcing it to postpone planned plant maintenance and enact emergency procedures to compel companies to run plants on imported coal and power, thus avoiding night-time outages.

Future Equipment Contracts

State-owned Bharat Heavy Electricals Ltd. (BHEL), which secured all power equipment contracts in the previous year, is poised to land most of the new contracts. Meanwhile, Larsen & Toubro, another key player, did not participate in most of last year's bids. Other manufacturers had scaled back operations due to inconsistent policies and lack of orders in previous years, with companies like Thermax–Babcock and BGR–Hitachi halting manufacturing in India. Contracts with firms from neighboring countries, particularly China, are discouraged and require regulatory approvals since 2020.

Policy Implications and Environmental Concerns

Since late last year, India has accelerated coal-fired power plant constructions to satisfy its power requirements, potentially threatening the progress made in reducing greenhouse gas emissions. Private firms have shown interest in developing 10 GW of coal-fired capacity over a decade, marking a resurgence in private sector involvement after a six-year hiatus.

While the expedited construction of new coal plants addresses immediate demand, it raises concerns about India's long-term environmental objectives. As the world's third-largest greenhouse gas emitter, India's reliance on coal could undermine its efforts to shift towards greener energy sources.

The Power Ministry, BHEL, Adani, NTPC, SJVN, and L&T have not yet responded to requests for comments regarding these developments. With this governmental push, India is at a critical juncture in balancing technological progress with environmental sustainability.