Indian Govt May Impose 21% Import Duty on Power Gear

The Government is likely to impose import duty of up to 21 per cent on power equipment for large projects. The Cabinet Committee on Economic Affairs (CCEA) may take up the issue in two weeks.

An indication to this effect came after the Principal Secretary to the Prime Minister Office, Mr Pulok Chatterjee, chaired a meeting to review the matter on June 20, 2012. At present, equipment for power projects with capacity of less than 1,000 MW attract 5 per cent basic custom duty, while there is no duty on those meant for projects with capacity of over 1,000 MW. The Government is now thinking of bringing this at par.

"The Power Ministry will circulate a new note on imposing import duty on power equipment. The Cabinet would take up the matter in two-weeks," a senior Government official said.

The official said that the proposal was for 5 per cent basic custom duty, 12 per cent standard counter veiling duty (CVD or the duty imposed in lieu of Central excise duty) and 4 per cent special additional duty (SAD), taking the total to 21 per cent. The duty would be imposed only on future import orders. All orders already placed, but yet to be delivered are likely to be excluded from the proposal, the official added.

Level-playing Field

The Government wants to impose the duty to provide a level-playing field to domestic manufacturers and check the use of cheap Chinese boilers that do not meet safety standards.

However, private power producers are upset with the proposed move. "Equipment are not imported only from China. This is a false impression. Companies from the US and Europe have also set up many plants," said Mr Ashok Khurana, Director-General of Association of Power Producers (APP).

Once implemented, the proposal will benefit domestic producers such as BHEL, L&T and Bharat Forge. However, it has not gone down well with private power producers who rely on cheaper Chinese machinery.

Import of equipment for power projects was a major contributor in capacity addition during the Eleventh Plan, with almost 50 per cent of coal-based capacities based on imported equipment, Mr Khurana said.

On June 19, Mr Khurana wrote to the Power Secretary, Mr P. Uma Shankar, saying that any step at this stage that would increase the cost of power generation and delay capacity addition would be detrimental to the sector and the economy.

In February, the Power Ministry sent a proposal to CCEA, which could not be taken up. It was then said that such a proposal could be included in the Budget. However, it is believed that the matter was deferred on both the occasions due to stiff opposition from private power producers.