Government Likely to Impose 21% duty on Power Equipment Imports from China and Korea

5% BASIC, 12% COUNTERVAILING & 4% SPECIAL ADDITIONAL DUTY

Govt Likely to Slap 21% Duty on Imported Power Gear

PMO asks power ministry to float a note to protect local equipment makers from Chinese & Korean rivals

The power ministry, in the next couple of weeks, will move a note to the Union Cabinet proposing a levy of 21% on imported power equipment, a senior government official said.

On Wednesday, the Prime Minister's Office (PMO) asked the power ministry to float the note to protect local equipment manufacturers, including state-run BHEL, from Chinese and Korean competitors. Power companies have stoutly resisted any increase in duty on equipment import, especially after they have become costlier as the rupee had depreciated by 28% in the past two years.

“The power ministry will send a new note to the Cabinet to impose 5% basic, 12% countervailing and 4% special additional duty on imported power equipment, and it is expected to be taken up in the next 20 days,” the official said after attending the PMO meeting.

The meeting was chaired by principal secretary to the PMO Pulok Chatterjee and was attended by officials from the ministries of finance, power and heavy industries. At present, equipment imported for projects of less than 1,000 mw capacity attract 5% customs duty.

A committee headed by Planning Commission member Arun Maira had suggested imposition of 14% levy on power equipment. The rate and structure of duty has been a sticky issue among various departments in the government.

Association of Power Producers, representing 24 power generating companies, has urged the government not to impose any duty on imported power equipment. Ashok Khurana, its director general, said there has been an implicit duty of more than 28% on equipment and machinery imports against the recommendation of 14% duty by the Arun Maira Committee. “With this, the domestic manufacturers should be able to compete much better with the imported manufacturers as prices of the latter have gone up by over 28% in rupee terms,” he added.

Fuel availability and pricing concerns, financing difficulties, rupee devaluation and the poor financial health of state electricity boards have led to an increase in cost of power generation, and in many cases, have badly affected both the existing and planned projects, leaving developers with no option but to run projects at sub-optimal capacities or go slow on the commissioning schedules, Khurana said.

Source:ET