BHEL raises concerns over business conditions

Business

oi-Staff

By Super

Published: Thursday, August 22, 2013, 9:53 [IST]

New Delhi: Concerned over the present business scenario, state-run BHEL has said that survival of the domestic power equipment industry is closely linked to timely finalisation of infrastructure projects and getting a level-playing field.

Overall economic sluggishness and cheaper imports, especially from China, are hurting the business of many local power gear makers, including BHEL.

"The survival of the domestic electrical and power equipment sector is closely linked to timely finalisation of infrastructure projects and addressing the issues of non-level playing field vis-a-vis imports," BHEL has said.

In the annual report for 2012-13, the Maharatna company said India's investment cycle is inextricably linked to the power cycle, as 30 percent of the nation's capital formation is determined by the power sector.

"The Cabinet decision to impose duty on import of power equipment has addressed the disadvantages of around 5 percent only, while a gap of about 9 percent still remains," it said.

Last year, the government had imposed a 21 percent import duty on power equipment. Then, the Cabinet had approved 5 percent basic customs duty, 12 percent countervailing duty and 4 percent special additional duty on imported power gear.

Meanwhile, the Heavy Industries Ministry is pitching for hiking the levy on overseas power gear as part of efforts to provide a cushion for local players.

"The key problems hindering the growth of the power sector are land, fuel, environment&forest clearances and investments besides security issues," the company noted.

Besides, there are challenges such as skill deficit and constrained availability of critical raw materials.

BHEL, which saw its latest June quarter profit nearly halve to Rs 465 crore, has said that substantial manufacturing capacity is being under-utilised.

"As substantial manufacturing capacity in the industry being under utilised due to delayed conversion of orders triggered by subdued consumption demand, capital investments in expansion of facilities in industries are not taking place.

"This further leads to reduction in employment, less consumption of raw materials and commodities and intermediary goods as well as subdued growth of service sector," the report said.

According to the company, depressing growth of the world economy and its contagion effect has taken sheen out of Indian industry "leading to a semblance of stagnation in industrial production".

PTI