Super critical BTG market structure in India is highly capital and technology intensive and is dominated by large OEM’s which typically can be split in following three segments :
- OEM’s (BTG Suppliers) with integrated offerings – BHEL, Alstom, Doosan, Dongfang etc.
- OEM’s dealing in turbo-generator space – GE, Toshiba, Siemens etc.
- OEM’s dealing in boiler and related auxiliaries – Ansaldo, Thermax, ISGEC etc.
Supercritical segment has seen rapid growth in 12th FYP, with morethan 67 GW capacities being awarded so far under this segment. However, it is quintessential to note that a sizeable proportion of the capacities being awarded went to the Chinese OEM’s and some developers due to paucity of funds have stalled the development on projects.
SuPC BTG MARKET – COMPETITION STRUCTURE
The supercritical BTG market in India depicts oligopolistic competition market structure coupled with contestable features. The contestable market structure enables the barrier free entry and exit in the market which typically is not the case with oligopoly. However, the SuPC market in the country is dominated by major 5 to 6 players inclusive of Chinese, domestic and other foreign OEMs. Also, the pricing of the products by OEMs for SuPC BTG market is effectively rigid in nature which clearly means that the firms engage in non-pricing competition.This scenario ensembles the case for competition based on other factors like product quality, project financing capabilities, discount factor and TAT to list a few which shows that the market structure is also having characteristics of an oligopoly. It is pertinent to note that aggressive marketing and branding strategies are followed in Indian SuPC BTG market to “tighten up” the pricing and efficiency. Market participants OEMs always try and evolve with ways to reduce profit margins to have lower costs and increase efficiency to gain competitive advantage.As depicted, in Exhibit 01 if the price of the products in market increase from P to P1 the demand in terms of quantity reduces from Q to Q1 then the revenue shall also witness a dip depicted by total revenue B from A. Similarly, if the price reduces to P2 then the linked quantity increases to Q2 from Q and the total revenue becomes C.
SuPC BTG MARKET – CONDITION OF ENTRY
The ease of doing business in India has seen a drop further in 2015 to a global rank of 142 from 140 in 2014 which is depicted in Exhibit 04. The basic needs required to have a market entry in India is governed by factors depicted in Exhibit 05. Interestingly, the SuPC BTG market in India also depicts similar characteristics wherein market entry and exit is not too challenging, however the sustenance is as the market is highly contestable which would be better understood through the Porter’s 5 force model examination. The market entry ease through the 5 forces model is dealt in subsequent slide.
SuPC BTG MARKET – STARTING A BUSINESS & APPROVALS
Starting a business depends upon the ease of doing one in the country and how suitable environment a country is aiding for same. If the process to set up a business is marred with series of approvals and NOCs leading to a cumbersome scenario then setting up new business is more challenging.
On the contrary if the alternate holds good then starting a business is easy which is the case with economies of Singapore and New Zealand to list a few. In India we have completely different case as securing environmental clearances, procuring land, registration and tax approvals are significantly challenging. Hence, for any new player foraying into SuPC BTG OEM space would be a tough ask as apart from the listed approvals in Exhibit 07 the new entrant needs to ensure a manufacturing base in India either on its own or with a JV which currently is posing a challenge for foreign players especially the Chinese OEMs
Of the 74 GW capacities in so far placed order for BTG market in India, 45 GW have been awarded to foreign OEMs on stand alone basis with Chinese OEMs leading the concentration with retaining the share of close to 60% in the foreign players market. Chinese OEMs contributed close to 27 GW of orders placed on stand alone basis till date for SuPC BTG market. The domestic suppliers though dominate the overall boiler space, however fall short considerably in stand alone SuPC BTG segment with only bagging 23 GW orders. Close to 6 GW orders are shared by domestic-international (DI) category players of which nearly 65% went to non-Chinese foreign participants.