Thermax wants time-bound implementation of GST to take on the Chinese threat

PUNE: Corporates have yet another reason for wanting a time bound implementation of the GST: to take on the Chinese threat.

"We want a level playing field because right now, Chinese companies have a 14-25% advantage over us due to the conditions under which they operate. This needs to be offset and GST could do that. The uneven competitive pressure from China, especially in the power segment which may extend to other segments, is being felt in India and in global markets," MS Unnikrishnan, managing director, Thermax, said. He added, "We send delegations of our people there to see how they do it."

He added, "Once Indian industry grows then we can take on competition but right now we need a uniform tax structure. Chinese companies benefit from the export incentives, the opaque operations of their banks under which government funds get used for capacity expansion so that their total tax incidence is 17%, giving them a cost advantage over us."

Thermax, the over Rs. 4900 crore energy and environment player, has a wholly-owned subsidiary in China, Thermax (Zheijiang) Cooling and Heating Engineering Co Ltd, and Unnikrishnan said this makes them even more aware of the advantages that Chinese companies get.

Apart from the competitive threat from Chinese manufacturers, industry is now preparing for a slowdown that is coming. Hence, despite its heating equipment plant in Savli, Gujarat, nearing its rated capacity the company is not planning an expansion just yet. "We need to expand the factory but have put it on hold for the moment, since there are all the appearances of an economic slowdown," Unnikrishnan said.

Thermax, which derives 77% of its income from the energy business, is eyeing the clean development mechanism and carbon credit trade. Last year, it set up Thermax Sustainable Energy Solutions Ltd, a subsidiary, which will enable smaller companies use clean technologies.

"The cost of a stand alone CDM project ranges from Rs. 25-40 lakh and this may be out of reach for a smaller company although it is entitled to carbon credits. We will do the documentation, investment and measurement for them, get the carbon credits and share with the customer who will get a majority of the revenues. But we will be able to sell our bio-mass fired boilers," Unnikrishnan said.

He added that this makes TSESL the first corporate, globally, to have been recognised as an industrial Programme of Activities (PoA) under the UNFCCC. Most such accredited entities are either consultants or governments.

Despite the December 2012 expiry of the Kyoto Protocol, Indian companies will be able to trade under the Bureau of Energy Efficiency’s Perform, Achieve and Trade, or PAT programme. This is a cap and trade mechanism where a cap is declared on the quantum of emissions permissible requiring a company to purchase such permits, or carbon credits, that are equivalent to their emissions. Thus, a domestic instrument has been created which the subsidiary will target, Unnikrishnan said.