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Home News Power Sector News 19% import duty likely on power equipment for mega projects

19% import duty likely on power equipment for mega projects

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UMPPPower generation equipment for projects above 1,000 MW may attract import duty at the rate of 19 per cent. The Cabinet Committee on Economic Affairs (CCEA) is expected to take a call on the issue in the next 15 days. If the proposal is approved, it will give domestic equipment manufacturers such as BHEL, L&T and Bharat Forge a major boost. This will be the second piece of good news for the manufacturers after the Supreme Court's order in the NTPC issue, announced recently. However, the duty hike may not go down well with power producers such as Reliance Power, which rely heavily on imported equipment.

A person familiar with the development told Business Line: "The Finance Ministry has favoured the imposition of 5 per cent basic Customs duty, 4 per cent additional import duty and 10 per cent countervailing duty (imposed in lieu of excise duty for domestic producer) making a total of 19 per cent." This has been intimated to the Power Ministry and the Heavy Industry Ministry. Now, the Power Ministry is likely to move a formal proposal for the consideration of CCEA soon, he added.

The Heavy Industries Minister, Mr Praful Patel, had been actively pursuing this matter.

He took this matter up with the Prime Minister after discussing it with the Power Minister. Although some sections in the Government have talked about banning imports, Mr Patel clarified, on record, that import of such equipment cannot be discontinued.

At present, power generation equipment for projects below 1,000 MW bears a duty of 5 per cent while there is almost nil duty on equipment for projects above 1,000 MW. The Arun Maira Committee had suggested that duty be levied at 14 per cent while a committee of Secretaries recommended 19 per cent duty for bigger projects.

Domestic equipment manufacturers allege that there is no level playing field. Foreign machines are cheaper by up to 14 per cent. This is hurting the local players' investment and capacity expansion plans.

A Heavy Industries Ministry official said that if nothing is done now, BHEL may find some of its capacity lying idle during the Twelfth Plan period.

However, power producers are not very happy with such thinking.

A source close to such companies said that, when the requirement is high, margins are thin and power is to be provided at a cheaper rate, any price increase will have to be borne by the end-user.

Source- Hindu


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