Indian DHI Seeks 10pc Customs Duty on Imported Power Gear

Differing with the Power Ministry, the Department of Heavy Industry in India (DHI) has pitched for higher customs duty of 10 per cent on imported power gear to protect the interests of BHEL and other domestic manufacturers.

"The Department of Heavy Industry (DHI) has proposed 10 per cent customs duty on import of power equipment as 5 per cent duty will not be sufficient to protect the interests of domestic companies," an official told PTI.

The Power Ministry, however, in its draft cabinet note, has suggested just 5 per cent customs duty on imported gear.

Grappling with cheap imports and stiff competition, domestic power equipment makers like BHEL and L&T have been demanding levy of 14 per cent duty on imported gear, mainly from China.

The DHI as well as the Power Ministry are in agreement for overall levy of 14 per cent but are differing on the quantum of customs duty.

According to the official, the DHI has proposed a total levy of 14 per cent comprising 10 per cent customs and 4 per cent special additional duties. There need not be any countervailing duty, he added.

The Committee headed by Planning Commission Member Arun Maira in its report had also suggested imposition of 10 per cent customs duty and 4 per cent special additional levy.

The Power Ministry has come up with a 14 per cent levy structure --5 per cent customs duty, 5 per cent special additional duty and 4 per cent countervailing duty.

Customs duty is levied on imports as part of efforts to protect the interest of the domestic industry. Countervailing duty is an additional tax on imports to offset concessions and subsidies granted by a country to its exporters.

Special additional duty is aimed at counter balancing various local taxes like sales tax and VAT.

The Committee of Secretaries had pitched for 19 per cent levy on imported power gear --5 per cent customs duty, 10 per cent countervailing duty and 4 per cent special additional duty.

Currently, projects with less than 1,000 MW generation capacity attract 5 per cent import duty while the rest enjoy duty-free import of equipment.
Opposing the proposal to levy 14 per cent duty on imported equipment, most of the private power producers have said such a tax would ultimately result in higher power tariffs.

In this regard, the Association of Power Producers (APP) -- that includes Reliance, Tatas and Essar -- have written to Finance Minister Pranab Mukherjee.

APP in a letter has said that imposition of any such levy would not benefit the power sector or consumers but "two/three domestic suppliers".