 "Chinese equipment firms pinning hopes on industrial parks")
The industrial-park scheme, aimed to revive the Indian manufacturing sector, has given Chinese companies the hope that they will be able to reduce costs by sourcing part of the equipment requirement for boiler-turbine-generator packages for local clients.
The Union Cabinet's in-principle approval to signing of a memorandum of understanding for setting up industrial parks in partnership with the Chinese has come ahead of Prime Minister Narendra Modi's meeting with Chinese President Xi Jinping on the sidelines of the BRICS (Brazil, Russia, India, China and South Africa) summit next month. The two sides have already identified five states - Uttar Pradesh, Andhra Pradesh, Gujarat, Maharashtra and Karnataka - where these parks will be set up.
Meanwhile, ahead of her first meeting with her Chinese counterpart in Beijing, Commerce Minister Nirmala Sitharaman on Sunday said she would make a strong pitch for greater access for Indian goods and services in China and seek big-ticket investments, including those for Chinese industrial parks in India. Sitharaman, who is part of the Indian delegation accompanying Vice-President Hamid Ansari, will meet Chinese Commerce Minister Gao Hucheng on Monday.
"This is a mega opportunity for us. We are planning to source cost-effective auxiliary equipment like pumps, motors, fans and cables from the units to come up in these parks," the India representative of a large Chinese company operating here told Business Standard. He did not wish to be named. The auxiliary equipment could account for half the cost of supplying a BTG package.
"For many months now, I have been finding it difficult and embarrassing to write the monthly reports to be sent to our China headquarters. There has been no chance (new tenders) at all. Now, all that will change," said the executive.
His enthusiasm is palpable. Chinese companies had benefitted when the power-generation sector was opened up a decade ago. Around 25,000 Mw of capacity installed in the country since then has been based on equipment imported from China. Also, another 42,000 Mw of capacity under construction is based on Chinese equipment. The equipment have been supplied by five Chinese companies - Dongfang Electric Corp, Shanghai Electric Corp (SEC), Babcock Wilcox, Beijing Beizhong and Harbin. These firms gained from a weak local manufacturing capacity, apart from their ability to beat their Indian counterparts on the pricing front.
However, things changed two years ago, when 21 per cent import duty was imposed on power equipment. Chinese manufacturers have been losing ground to the local giant, Bharat Heavy Electricals Ltd (BHEL), which has managed to claw back its market share. Besides, the Chinese yuan's recent appreciation against the dollar, a slowdown in new project activity and local manufacturing condition have also added to Chinese companies' woes.
"Chinese firms, including ours, have not been able to bag even a single project order in at least a year and a half. But now we are hopeful of a big positive announcement soon. The industrial-park scheme is just the beginning and it has broken the ice of economic engagement between the two nations," said the executive quoted earlier.
In an interview last year, Li Qi, Dongfang's former chief representative in India, had told Business Standard: "The low-cost factor, which helped us earlier, is no longer applicable. A large part of our transactions are dollar-denominated and the yuan's appreciation has made earning profits very difficult for Chinese companies. Also, the higher import duty levied by India has led to an escalation in our costs."
By comparison, rival BHEL moved ahead by bagging the bulk of new orders announced in the Indian market last year. The company emerged the lowest bidder in an estimated 8,000 Mw of the 17,000-Mw new power project orders finalised. However, these orders mostly came from state-owned companies like NTPC, whose bulk tenders for equipment procurement mandates local manufacturing as a pre-condition.