Proposal on foreign power equipment levy gets backing

Proposal on foreign power equipment levy gets backing

New Delhi: India may impose a 14% import duty on power generation equipment from next year to discourage cheaper imports from China.

“Everybody agreed that there is a disadvantage to local manufacturers. We are proposing its (custom levies) roll-out in 2012," heavy industries minister Praful Patel said on Thursday.

“We support the recommendations of the Maira committee." The minister was speaking with reporters after a meeting with officials from the ministries of commerce, power and heavy industries, and top executives of Bharat Heavy Electricals Ltd (Bhel), NTPC Ltd and Larsen and Toubro Ltd (L&T).

If the government decides to charge customs duty on such equipment, it will increase costs for power utilities as Chinese imports of boilers and turbines will become expensive.

Chinese imports are relatively cheaper because equipment makers from that country benefits from low interest rates and an undervalued currency. Undervaluing the currency makes exports cheaper and increases the demand of products.

“There will be a minimal increase in the cost of power, only 1-2%, that can be done away with by increasing efficiency at the plants," said Bhel chairman and managing director B.P. Rao.

Bhel, the country’s largest maker of power machinery, gained the most in almost nine months. Its shares climbed 4.18% to 329.25 at close in Mumbai, the most since 14 February, Bloomberg reported. L&T shed 0.46% to 1,380.85. The Bombay Stock Exchange’s benchmark Sensex gained 0.1%.

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“There is a strong need to grow our own industry. If we have ensure investments, we have to ensure some sort of preference to the local players," an official of the heavy industries department said, requesting anonymity. “Power equipment has a bright future and this step will allow them prepare themselves on the export front. There is a great scope for export to African countries."

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“There is a consensus that has been appreciated," said A.M. Naik, chairman and managing director of L&T.

State-owned Bhel and L&T, India’s largest engineering and construction firm, have been lobbying with the government to limit Chinese competition.

Bhel has been facing competition from Chinese power generation equipment firms such as Shandong Electric Power Construction Corp., Shanghai Electric Group Co. Ltd, Dongfang Electric Corp. Ltd and Harbin Power Equipment Co. Ltd, both in local and overseas markets.

Power generation equipment makers having a manufacturing base in India stand to benefit from such a move.

Bloomberg contributed to this story.2