Power equipment makers said introduction of the Goods and Services Tax ( GST) will bring them close to a “level playing field” with the Chinese, but the fundamental problems in the sector persists and lack of orders is bleeding these units.
The 18% GST that applies to Indian manufacturers will also be applicable on imports now. But manufacturers point out that the Chinese still have access to cheaper credit and inputs and they would be fighting for a slice of the shrunk pie of orders in the domestic market since there are no signs of recovery in capex for thermal power.
Capital goods manufacturers in the power sector have been complaining that their Chinese counterpart have an undue advantage over them and are able to price products cheaper. Of the 117 gigawatts of projects ordered for the 12th Five year Plan, almost 45% were bagged by foreign players led by the Chinese.
The 13th plan has not seen any major fresh investment in the conventional power sector, leaving companies like BHEL, L&T, Thermax among other with dry order pipelines. “Post GST, we would have level playing field.
But, we see concerns and challenges over its implementation for next 3-6 months. In our power business, tax is either reimbursable or inclusive. The tax arbitrage enjoyed by the Chinese manufacturers will not continue after GST,” said Shailendra Roy, member of the board and whole-time director (power, heavy engineering & nuclear), Larsen & Toubro.
“It is a step towards level playing field with foreign makers but our GST is still among the highest in the world. The Chinese enjoy other costs advantages that we don’t,” said MS Unnikrishnan, managing director and chief executive officer of Puneheadquartered Thermax.
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