BHEL, Thermax rise as Govt mulls 14% import duty on power gear

Shares of Bharat Heavy Electricals Ltd. (BHEL), Thermax and BGR Energy rallied amid media reports that the Government was contemplating imposing 14% import duty on power equipment to curb the influx of cheaper products, primarily from China. The Union Heavy Industries Ministry has sought the Government’s approval for a proposal to impose a 14% import duty on power equipment, Minister Praful Patel said in New Delhi today. Officials from companies, including BHEL, Larsen & Toubro Ltd. met Patel in New Delhi today. There seemed to be a consensus for ensuring a level-playing field for the domestic power equipment manufacturers like BHEL and L&T vis-a-vis Chinese imports. In 2010, a panel headed by Planning Commission member Arun Maira recommended 14% import duties to bridge the disadvantage faced by local manufacturers against overseas rivals, especially from China. "We are asking for a level playing field, we are not asking for any special protection," BHEL Chairman B. Prasad Rao told reporters in New Delhi after today’s meeting. "There is agreement that the old argument about indigenous manufacturing not having enough capacity to carry India is no longer valid," Rao added. "We are not asking for protection, only level-playing field... there seems to be a consensus on this," L&T Chairman A.M. Naik told reporters after the meeting. Besides the industry players, senior officials of the Ministries of Heavy Industries, Power and Commerce attended the meeting. Currently, the projects with less than 1,000 MW generation capacity attract 5% import duty while the rest enjoy duty free import of equipment.



The move for import duty is being opposed by the private sector power producers. "Imposing customs duty is likely to have adverse implications for the capacity addition programme and financials of the sector as it is likely to increase cost of power", Association of Power Producers Director General Ashok Khurana said. But, BHEL argues that the impact of import duty imposition on power tariff would be minimal and can be dealt with. "Earlier there was not enough indigenous manufacturing capacity, but now this argument is not valid," Naik said. Shares of BHEL is currently trading at Rs336, up Rs7.25 or 2%.The stock has hit a high of Rs338 and a low of Rs332. Also Thermax stock was up 0.17% at Rs495.