In a letter written to prime minister Manmohan Singh, the Association of Power Producers (APP), represented by all the major private sector power companies, has said imposition of customs duty will have serious implications on the cost structures and tariffs and can seriously impact the capacity addition programme being planned by the private sector, besides resulting in further delays in commissioning of projects.
"In fact, the tariff for all the competitively-bid projects may have to be adjusted upwards for such a levy," the association has written to the prime minister seeking an appointment to present their case before him.
The concern of the companies is on account of a proposal given by a committee of secretaries (CoS) to impose 5% customs duty, 10% CVD and 4% SAD on imported power equipment to provide a level playing filed to the domestic industry and give a boost to domestic production of power equipment. This proposal is being examined by the power ministry for finalising a Cabinet note on the subject.
"It is a move that was long over due. The government has finally realised the merit of this duty, that will create a level playing field. It will also save India precious foreign exchange drain," said L&T Power CEO Ravi Uppal. "We welcome competition, but the Chinese currency is giving manufacturers there an undue advantage," he added.
This entire debate about an import duty on power equipment was sparked off by Planning Commission member Arun Maira. In a report submitted by him in February 2010, Maira recommended an import duty of 10% and a special additional duty of 4% on equipment imported from China, Korea or for that matter from GE in America.
Maira's recommendations found takers in the ministry of heavy industries while the power ministry fought tooth and nail against it. The power ministry's claim is that keeping capacity addition targets in mind, this import duty should be imposed only from the 12th Plan onwards.
Currently, no duty is levied on import of foreign equipment for mega power and ultra mega power projects while a 5% duty is levied on imports for smaller projects.
Source- Economic Times