Following reports that India intends to remove restrictions on Chinese companies vying for government contracts, BHEL shares fell 10% below the circuit limit on January 8.
As a result, Bharat Heavy Electricals’ stock fell 10% to quote at Rs 273.20 per share. The shares ended the day down 8.78 percent at Rs 276.90 per share.
As New Delhi looks to reestablish commercial ties in an atmosphere of reduced diplomatic and border tensions, the finance ministry aims to remove five-year-old prohibitions on Chinese companies tendering for government contracts, according to a Reuters article that caused the precipitous decrease.
By producing turbines, generators, and boilers for state-owned companies like NTPC and private companies like Adani Power, BHEL plays a crucial role in India’s energy security. The company builds, commissions, and supplies equipment for numerous thermal power plants throughout the country, including large supercritical projects (800 MW+).
In the meantime, Siemens’ stock dropped more than 4% because China’s CRRC, which is a rival to them in railway contracts, may now be permitted to take part in rail contracts if the committee’s recommendations are accepted, as the article suggests.
China’s state-owned CRRC was barred from submitting a proposal for a $216 million train production contract months after the restrictions were announced.
The restrictions, which were put in place in 2020 following a military conflict between the two nations, mandated that Chinese bidders register with an Indian government committee and receive security and political clearances.
Other capital goods stocks, such as ABB India and Hitachi Energy, dropped 4-4.5%. Blue-chip company L&T’s stock dropped by almost 3%.
Chinese companies were essentially prevented from vying for contracts with the Indian government, which were estimated to be valued between $700 billion and $750 billion.
One government source told Reuters, declining to be named because they were not authorized to talk publicly, “Officials are working to remove the registration requirement for bidders from bordering nations.”
Other government agencies who are experiencing shortages and project delays as a result of the 2020 limits requested that the Ministry of Finance loosen restrictions.
A second government source told Reuters that “several ministries have requested exemptions to overcome the constraints that could derail projects in their sectors.”
India’s aspirations to increase its thermal power output to roughly 307 GW over the next ten years have been hampered by restrictions on imports of power sector equipment from China.
Easing the limitations has also been suggested by a high-level group led by former cabinet secretary Rajiv Gauba. Gauba currently works for a prominent government think group.
