Bloomberg News

Bharat Heavy Gains as India Plans Power Import Tax: Mumbai Mover

February 21, 2012

Feb. 21 (Bloomberg) -- Bharat Heavy Electricals Ltd., India’s biggest power equipment maker, was set to climb to a three-month high on expectations the government will increase duty on imports to help it compete with overseas rivals.

Bharat Heavy surged as much as 4.6 percent to 317.55 rupees and traded at 315 rupees as of 10:42 a.m. in Mumbai, poised for the highest level since Nov. 14. The benchmark Sensitive Index gained 0.5 percent.

India’s cabinet may approve a proposal to increase duty on imports of generation equipment to 19 percent to help local manufacturers Bharat Heavy and Larsen & Toubro Ltd., a government official said. Chinese suppliers have won orders from Reliance Power Ltd. and Adani Power Ltd. as India seeks to add 100,000 megawatts in generation capacity by 2017.

“There could be some cancellation of orders from Chinese equipment makers, which could flow to Bharat Heavy or any domestic player,” said Rohit Singh, an analyst with IDBI Capital Market Services Ltd. “Chinese equipment is cheaper and the percentage of their discounts comes to 15-20 percent, so this will make private players like Reliance and Adani think twice before ordering from abroad.”

A panel headed by Planning Commission member Arun Maira recommended in 2010 a levy of 14 percent in import duties to “bridge the disadvantage” faced by local manufacturers competing with overseas rivals, especially from China. India currently imposes a 5 percent duty on import of equipment for projects with less than 1,000-megawatt capacity.

No Special Protection

Bharat Heavy isn’t asking for any special protection, Chairman B. Prasada Rao said in November after India’s power equipment makers met Heavy Industries Minister Praful Patel seeking the 14 percent duty.

“I have received feedback from the concerned ministries and am confident that the cabinet will approve our proposal some time in the next two weeks,” Power Secretary P. Uma Shankar said on Feb. 19 by telephone from New Delhi.

Chinese suppliers won 34 percent of new equipment orders for additional capacity that’s planned in Asia’s second-fastest growing major economy in the five years ending March 31, according to the Ministry of Power.

Chinese equipment makers such as Shanghai Electric Group Co. and Dongfang Electric Corp. want to tap into Prime Minister Manmohan Singh’s $1 trillion infrastructure investment plan, including $400 billion for power.

The federal budget is scheduled to be presented in India’s parliament on March 16.

--Editors: John Chacko, Baldave Singh

To contact the reporter on this story: Kartikay Mehrotra in New Delhi at kmehrotra2@bloomberg.net

To contact the editor responsible for this story: Sam Nagarajan at samnagarajan@bloomberg.net


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