Monday, November 29, 1999

Foreign cos may have to invest in India to supply equipment

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A newly established Planning Commission committee is reviewing the prospects of forcing all foreign equipment manufacturers to invest in Indian facilities before they will be allowed to enter into contracts to supply equipment. Chaired by Planning Commission member Arun Maira, the committee will provide formal recommendations, including guidelines for imposing the policy between two private players — foreign and domestic — by September.While Cabinet-level meetings between power and heavy industry secretaries are deliberating on the Planning Commission's recommendation to restore the 10 per cent import duty on power equipment, Maira believes a framework for a foreign investment policy for power will be the next step in levelling the playing field between Indian manufacturers and foreign suppliers. "When duties on import equipment were lowered in the mega-power-policy, the playing field was tilted against our domestic manufacturers in favour of importers," Maira told The Indian Express. "We must restore the field... if we are a very large market, why shouldn't we be using our leverage over the market," he added. The policy would be similar to the bulk-tender deal being bid out by government power company NTPC for 11 supercritical projects. Only companies with Indian tie-ups will be awarded contracts from NTPC.The flaw in the plan currently stands at the implementation level in determining how the government would dictate terms to private companies seeking investments from private players abroad. Maira said the government would hesitate in trying to "strong arm" private companies into including such clauses in their agreements with foreign companies, like China has done with its state-owned companies. But while the committee's deliberations are focused on finding alternatives, the government may be forced to pursue a similar policy if it chooses not to insist on the formation of joint-ventures between the domestic and foreign parties. "It is very rare that we insist on JV's being set up, perhaps we will look into a phased manufacturing system," he said, while acknowledging that a more blunt policy may be necessary.

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