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Time for real transformation

Em News Bureau ,  Thursday, July 26, 2012, 17:01 Hrs  [IST]

Uttar Pradesh recently blacklisted over a dozen local transformer manufacturers when it found that the quality of their products was simply unacceptable. Any observer of the Indian transformer industry knows that while the country on the one hand can boast of producing the world's largest 1,200kV transformer, there is also a huge class of manufacturers whose products do not possess even a modicum of quality. What is worrisome and shameful is that this unscrupulous class is surviving and even thriving. This is simply because there is a market for their products—and that too, from government-owned entities.

What Uttar Pradesh has done now should have been done long ago. Further, it is not just UP, practically every state power utility should have taken this step years ago. What keeps marginal manufacturers of distribution transformers in business is the antiquated L1 policy that governs procurement in government circles. The drawbacks of this policy are well known but there is no corrective action. Power utilities tacitly admit that distribution transformers are purchased at prices that are shockingly low—lower than even the sum of costs of individual components of a standard transformer. Such transformers are purchased—ironically through a long-winded tendering process that has also cost the government exchequer—in full knowledge of anticipated failure. No utility deviates from the L1 routine lest it faces the wrath of higher authorities, typically the Central Vigilance Commission.

The power sector has changed drastically over the past decade but the L1 procurement policy threatens to stoically hold its ground. It is not just about scrapping L1; chances are that it would be replaced by something equally or more ineffective. The entire procurement policy of state power utilities must be revisited. Quality should not just be a fortunate accident; it should be integral to the procurement policy. The government, one must admit, is working around the issue of quality. In the case of distribution transformers, insistence on BEE energy-efficiency rating and BIS-certified electrical steel are noble intentions. However, it is the core of the issue—the procurement process— that needs a radical transformation.

India's general power shortages are not arising only from inadequate generation capacity. Electricity is unable to reach consumers due to weak distribution infrastructure that includes insufficient or inefficient transformation capacity. The failure rate of distribution transformers in India is among the highest in the world, estimated at over 20 per cent. While power utilities today are expected to create transformation capacity for future demand, most of them are still struggling to service even the existing demand load—thanks to the fleet of substandard transformers.

The action taken by UP should be acknowledged as a forerunner of potential change in the procurement process. Blacklisting an errant manufacturer is one part of the task; the bigger duty is to create a policy environment that antagonizes the very existence of unethical suppliers.
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