The proposal is aimed at safeguarding the interests of the domestic power equipment makers like BHEL and L&T.
At present, equipment for projects with less than 1,000 MW generation capacity attract 5 per cent import duty while the rest enjoy duty-free import of equipment.
Power gear makers have been demanding the duty as they are facing stiff competition from the Chinese companies.
Meanwhile, private power producers have opposed imposition of duty stating that this would lead to an increase in electricity tariffs.
While the power ministry is proposing 5 per cent basic customs duty on the equipment, the Commerce Ministry is pitching for 15 per cent, an official said.
Meanwhile, the Budget 2012-13 has also proposed to increase the excise duty from 10 per cent to 12 per cent.