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Uncertainty over import levy, higher excise duty impacts BHEL
April, 09th 2012

State-run BHEL's business prospects are getting impacted by the continuing uncertainty over higher levy on imported power equipment as well as the hike in excise duty, according to company officials.

To provide a cushion for Bharat Heavy Electricals and other domestic players against cheaper overseas power equipment, especially from China, the government is looking at slapping higher duty on imported gear.

The government is yet to finalise the quantum of duty hike on imported equipment while speculations are rife that the increase could be up to 19 per cent.

"It (uncertainty over higher import duty) is impacting our operations... Whatever the government is going to implement, definitely we will be getting the advantage," a senior BHEL official said.

Further, the government's move to increase excise duty by two per cent is also impacting the company.

"It hurts a little more after the (imposition) of two per cent excise duty. The situation is accentuated, especially with the two per cent excise duty," another BHEL official said.

In the 2012-13 Budget unveiled last month, Finance Minister Pranab Mukherjee hiked excise duty to 12 per cent from 10 per cent.

BHEL and other domestic entities, including L&T, are grappling with stiff competition from cheaper overseas gear mainly from China. Many private power producers have placed equipment orders with Chinese entities.

Presently, projects with less than 1,000 MW generation capacity attract 5 per cent import duty while the rest enjoy duty-free import of equipment.

Hit by sluggishness in the power sector, BHEL saw its order book more than halve to Rs 22,096 crore in 2011-12 period as compared to the year-ago period.

The company's cumulative orders in hand stood at Rs 1,34,681 crore at the end of last fiscal.

However, BHEL expects to get orders of about 15,000 to 16,000 MW in the current financial year.

The power equipment maker's net profit jumped 14 per cent to Rs 6,868 crore for the financial year ended March 2012 on the back of improved operational efficiency. The net profit stood at Rs 6,011 crore in 2010-11

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