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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