Indian Ministry Proposes 5% Tariff on Chinese Equipment

To discourage the purchase of cheap power equipment from China and to provide a level playing field to domestic manufacturers, the power ministry of India has proposed a 5% tariff on such imports from the neighbour.

The plan may face flak from key ministries.

The proposal, made in a draft note, was circulated to the ministries of finance, commerce and heavy industries, and the Planning Commission for comments on Nov. 23, 2011.

"It is not a good proposal," said a commerce ministry official. "They are going back to what the committee of secretaries (CoS) said last July. We are not agreeing to the structure of their proposal."

An official in the department of heavy industries, too, said the draft note favours the CoS' recommendations and not the suggestions of the Arun Maira committee. Heavy industries minister Praful Patel earlier this month said the ministry supported "the recommendations of the Maira committee".

Planning Commission member Arun Maira had recommended a 10% customs duty and a 4% special additional duty on power generation equipment imported from China to strike a balance between protecting local manufacturers and the need to import equipment to boost power production.

The CoS recommended a 5% import duty on power equipment imports from China apart from a 10% countervailing duty and a 4% special additional duty. But under this plan, importers would have to pay only a 9% duty in most cases as the countervailing duty (CVD) would not be applicable.

"CVD is to counter excise duty on power equipment. But as minimal excise duty is imposed on power equipment, hence, this virtually means CVD is not applicable on such imports," the heavy industries ministry official said, adding that the government plans to implement the CoS' proposal before the Union budget for the next fiscal year.

"The power ministry in the draft has also said that it will be applicable from the day the cabinet passes the proposal," said the official. "The draft should go to the cabinet in a month's time."