Chinese banks offer cheap yuan loans to finance more than $50-bn Indian orders for power equipment, pose threat to BHEL, L&T, Thermax

Chinese banks have offered yuan loans to finance more than $50 billion of power equipment for Indian firms at lower interest rates, giving a shot in the arm to credit-starved power companies but posing a serious threat to Indian suppliers such as BHEL and L&T.

Chinese lenders have approached the government for accepting renminbi as a currency for external commercial borrowing by Indian power firms. Private power firms said direct overseas borrowings are restricted to a few currencies such as the US and Australian dollars, yen and euro.

Indian power firms are strongly backing the Chinese move as they are struggling to finance projects after local interest rates rose to 13% from 9% in the past two years. Loans from Beijing would be available at least 200-300 basis points lower than rupee debt, making a substantial difference for projects as costs run into thousands of crores of rupees.

Local suppliers are feeling threatened by rising imports of Chinese equipment. Orders for 80,000 mw of equipment have been placed with Chinese companies. Cheap Chinese loans will fatten the order books of companies like Shanghai Electric Corp, SEPCO Electric Power, Dong Fang and Harbin, which have large capacities to meet the demand in China that generates 800,000 mw and is adding 100,000 mw of new capacity every year. India has a capacity of 170,000 mw.

ref:
http://economictimes.indiatimes.com/news/news-by-industry/energy/power/chinese-banks-offer-cheap-yuan-loans-to-finance-more-than-50-bn-indian-orders-for-power-equipment-pose-threat-to-bhel-lt-thermax/articleshow/9486851.cms