Industry wary of Chinese service hubs

During Manmohan Singh's recent visit to China, a deal was signed to set up power equipment service centres in India

The government's plan to allow Chinese companies set up power equipment service centres in India has not gone down well with the domestic industry. Indian manufacturers are concerned about losing market share to Chinese makers.

Raj H Eswaran, president, Indian Electrical Equipment Manufacturers Association, said: "A level-playing field would have been created if we had made it mandatory for Chinese companies to set up manufacturing facilities, too, here. Also, there is a huge trade imbalance that must be addressed before promoting Chinese competition."

During Prime Minister Manmohan Singh's recent visit to China, a deal was signed to set up power equipment service centres in India.

The service centres will give firms access to spares and after-sales services for equipment imported from China. "We welcome healthy competition, but there should be level-playing field ... Chinese firms outbid Indian firms owing to the soft loans provided by the government, apart from subsidies," said a senior executive at IEEMA.

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

Last year, the Indian government had raised the basic customs duty (BCD) on import of equipment for mega and ultra mega power projects to five per cent, leading to an overall duty of 21 per cent including countervailing duty (CVD) of 12 per cent and a four per cent special additions duty (SAD). Earlier, power gear imports had attracted nil duty. "However, this five per cent additional duty has not addressed the problem fully. Indian firms are suffering a cost disadvantage of 24 per cent according to the industry's calculation," said the IEEMA executive.

According to him, the domestic industry has enough capacity to provide after-sales services. He pointed out that the Chinese firms have already captured 40 per cent of the domestic market, which offers annual sales opportunity of 17,000 Mw capacity.

India has a current domestic equipment manufacturing capacity of 27,000 Mw. In FY13, power equipment worth Rs 1,30,000 crore was sold in India. Twenty eight per cent of this comprised generation equipment, while 72 per cent of sales occurred in the transmission and distribution sector.