Industry unhappy with India's plans to allow Chinese cos set up equipment service centres

Indian manufacturers concerned over losing market share in the absence of level playing field to compete with Chinese manufacturers

The government’s latest plan to have Chinese companies set up power equipment service centers in India does not seem to have gone down well with the domestic industry. Indian manufacturers are concerned over losing market share in the absence of what they call “level playing field” to compete with Chinese manufacturers. 

 

During Prime Minister Manmohan Singh's recent official to China, the two neighboring nations signed a Memorandum of Understanding (MoU) in Beijing Wednesday to set up Power Equipment Service Centers (PESCs). China's National Energy Administration inked the initial agreement with India's power ministry. 

 

The service centers will give Indian companies access to spares and after-sales services for equipment imported from China. “We welcome healthy competition but there should be level playing field to compete with Chinese companies which outbid Indian firms owing to the soft loans provided by that nations government apart from various subsidies that drive down their cost,” a senior executive from Indian Electrical Equipment Manufacturers Association (IEEMA) said. 

 

Chinese firms have supplied equipment with a total capacity of 60,000 Megawatt (Mw) in India so far. Of this, 20,000 Mw has already been set up. The government’s latest initiative comes at the backdrop of a recent study by the Central Electricity Authority (CEA) that raised questions over quality of Chinese equipment. 

 

Also, the Indian government had last year raised Basic Customs Duty (BCD) on import of equipment for mega and ultra mega power projects to 5% leading to an overall duty of 21% including Countervailing Duty (CVD) of 12% and a 4% Special Additions Duty (SAD). Power gear imports attracted nil duty earlier. “However, this 5% additional duty has not addressed the problem fully. Indian firms are suffering a cost disadvantage of 24% according to the industry’s calculation,” the IEEMA executive said. 

 

He also said the domestic industry has enough capacity to provide after-sales services adding that the Chinese firms have already captured as much as 40% of the domestic market where an opportunity of annual sales of 17,000 Mw capacity exists at present. 

 

India has a current domestic equipment manufacturing capacity of 27,000 Mw. Power equipment worth Rs 130,000 crore was sold in India last financial year. Around 28% of this comprised generation equipment while the rest 72% of the sales occurred in the transmission and distribution sector.