Import duty on power gear opposed .

NEW DELHI: The power ministry has again opposed levy of any import duty on power equipment arguing it would have an adverse impact on the new power projects that are expected to be commissioned by March 2012.

In a letter to cabinet secretary K M Chandrasekhar, power secretary H S Brahma has asked that no import duty be levied till the end of 11th Plan (March 2012) so that the existing capacity addition programme is not disrupted.

The government is considering an across the board 11-14% import duty on foreign power-generation equipment following a recommendation by the Planning Commission member Arun Maira. The government had constituted a panel under Mr Maira to suggest ways to augment domestic manufacturing of power equipment.

The committee has also favoured the levy to adjust for the huge advantage that overseas manufacturers, particularly from China, enjoy over domestic companies. Chinese manufacturers enjoy tax benefits, better duty structures, low exchange rate of the currency, and also better infrastructure. This gives them cost advantage of up to 40% in comparison to Indian equipment manufactures.

The idea of an import duty to encourage domestic production has also found favour with the heavy industries ministry, which wants a level playing field for the domestic manufacturing industry.

Bhel, the country largest power equipment maker, is struggling to meet the huge demand of equipment from power projects, making import the only option if cost escalation is to be avoided.

The power ministry is concerned about the impact new duty could have on its capacity addition programme, considering that over 25% of the capacity planned in the 11th Plan will use imported equipment mainly from China.

“A plain reading of the report (Maira committee report) gives an impression that the said report is unanimous in all its aspects. However, the ministry of power, which was actively involved in the deliberations of the committee, had serious reservations on some aspects of the report, especially on the timing of the implementation of the measures, particularly on imposing a duty on imported equipment,” the power secretary said in his letter.

Source : The Economic Times