SK Kodandaramaiah | Director - Business Development, Power Mech Projects Limited
With the government´s push towards more power generation, what kind of opportunity do you see for balance of plant system and are these opportunities enough to sail through?
In India, as far as power sector is concerned, what can be a bigger opportunity than the envisaged 30,000 MW of capacity addition with 40 Super Critical thermal units in the pipeline. Since we are catering to site civil works, erection, testing and commissioning of various mechanical works for BoP area, I am optimistic that around Rs 2 crore per MW business opportunity will be there in the future.
As a company, we look for opportunities in three to four core areas apart from the main plant installation works. And, these include civil work, coal and ash handling work, and water system jobs are also very attractive business opportunities for us. If you look at the overall BoP packages and subsequently the opportunities, they are made up of three major components. To begin with, in the civil & structure package, we think there are opportunities worth Rs 1 crore per MW. Whereas, in packages like equipment supply and installation, mainly related to material handling, coal handling, ash handling, balance mechanical packages & electrical system installation and miscellaneous work, the opportunities may be worth Rs 1 to 1.2 crore per MW.
Could you tell us about your expertise in this BoP space and which are the projects that the company is currently undertaking?
At present, we have an orde rbook of around Rs 3,500 crore, considering our present offerings in the main plant and BoP segments. Considering our expertise in this field, we are already working on 5-6 projects where we are providing our knowledge base on the main plants and balance of plant related to civil and structural works. We are presently working on a civil and structural package for 500 MW Unchahar Project worth Rs 336 crore in the main plant and BOP areas. In addition, we are on the verge of completion of Rs 172 core worth package for the 2X800 MW Yarmaras project in Karnatataka.
Apart from these two, we are also working on the 2x660 MW project in Suratgarh, Rajasthan, which is around Rs 182 crore. We are also working on a couple of projects at Kothagudam in Telengana, and Namrupin, Assam.
Apart from these projects, we are also working on structural packages for the main plant for six projects. We also have expertise in the installation of coal handling packages and cooling water piping system. This also contributes to the stream of our company´s total revenue.
Therefore, even when our interest lies mainly in the main plant area, where we can expect some market growth, we are as well focusing to improve our position in the BoP business.
What are the possible key drivers for BoP market, specific to your expertise?
Our basic expertise is the site installation and project work. As of today we are not into engineering and into major procurement. Our expertise is in construction and ETC. In future, we may intend to take up the complete BOP work.
Therefore, what we are able to do in the main plant construction, we can also replicate the same in the balance of plant. The skills, the expertise, the resources and the type of inputs which are required are more or less similar.
The same group of people can be shuffled across and we can reasonably use them to our advantage in both the areas, main plant as well as the balance of plant.
Can you suggest the best practices that will help the BoP contractors in executing the projects on time?
Considering today´s scenario, the best practice is the integrated approach towards executing a BoP package. According to me, to avoid the delay in BoP package execution, the authorities should fix stringent qualification requirement, as there is a lot of competition in the civil work package of BoP. In India, there are many players who do not have the capability to take up the BoP packages, but still they bid for it and win the contract.
This is mainly because, Indian market is a cost driven market, where a bidder with low pricing, always is being preferred. But, in this exercise, the Authorities are forgetting that with low pricing, the bidder is tempted to compromise on quality and delivery parameters, which may hamper the entire project execution. This, in turn, leads to cost escalation due to delays in overall execution of projects. This kind of practice needs to be checked.
What are the challenges in executing a BoP package?
Since most of the power projects are handled by public sector companies, it is the decision making process which prevents these companies to appoint a bidder or a vendor with the criterion of successful and timely execution of a work and the price levels should be made to commensurate with the service or delivery.
Whereas, a private developer can take a call and can pay a premium on pricing to get the work done in a qualitative manner. So once there is improvement in the basic structure of bidding, then we can witness a drastic change in implementation of BoP packages which can bring in substantial improvement in the execution of entire power projects.
Meanwhile, other areas that need to be improved for timely project completion is proper execution of coal, ash handling packages and the civil works. Because, the products which cater to coal and ash handling are not standardised. These products are highly customised, and need to include project-based specifics, and then re-engineering, if required. And, this is where it leads to delay. So, if the implementation process in coal and ash handling improves, most of the projects can be commissioned on time.
For the timely completion of mechanical and electrical works, the key civil inputs have to be made available. This is easier said than done, since many civil inputs depend on the equipment layout, soil conditions and the key mechanical input data and there can be problems in interfacing the same. The skill lies in proper interfacing the key inputs for engineering of Civil works.
According to you which are the BoP packages requirement of skill manpower?
I think, the civil work package requires more skilled laborers as it incorporates the use of machineries such as earth moving, material handling, cranes, batching plants, concrete pumping and involves a lot of carpentary work, etc.
Since these machines are highly advanced, they require skilled manpower. Now the question is whether we have skilled manpower or not? And I must admit that, if India can achieve capacity addition to the tune of 20,000 MW annually in the last couple of years, we certainly have the skill manpower in India, but there should always be a drive to improve the skill levels for better productivity.