Level playing field for power gear cos: Patel

An inter-ministerial meeting on Thursday underscored the urgency for providing a level playing field to the domestic power equipment industry facing the onslaught of cheaper Chinese imports but it failed to agree over how much duty should be imposed on imported equipment.

The meeting was called by heavy industries and public enterprises minister Praful Patel and attended by senior officials from the power, commerce and planning commission. Representatives of domestic power equipment manufacturers like Bhel and L&T were also present in the meeting.

?Yes, a consensus has been reached and we are fully supportive of the recommendations of the planning commission. Now, we will have inter ministerial discussions before we come out with a final decision on it,? Praful Patel said while briefing reporters.

Sources said domestic manufacturers argued during the meeting that now that there is enough manufacturing capacity in the country. Hence, the government should impose duty on imported power equipment. They also pushed for making mandatory the central electricity authority?s performance standards for power equipment. L&T chairman AM Naik led the charge for the domestic industry. Private players like L&T, Bharat Forge, JSW, Thermax and BGR Energy are in the process of setting up power equipment manufacturing facilities to benefit from the government?s policy. Meanwhile, Bhel is also expanding its manufacturing capacity from 15,000 mw to 20,000 mw a year.

?We aren?t asking for protection, only a level playing field,? AM Naik said.

But private power producers have opposed the government?s move. ?Any step to withdraw the duty waiver on import of equipment will further aggravate cost pressures and lead to a serious impact on project pipeline. Imposing customs duty therefore is likely to have adverse implications for the capacity addition programme and financials of the sector as it is likely to increase cost of power,? Ashok Khurana, director general, Association of Power Producers, said. APP?s members include big private power companies like Reliance Power, Tata Power, Adani and Lanco.

Under the government?s mega power policy, developers can import power equipment duty free. Private developers prefer Chinese power equipment which is 15-20% cheaper compared to equipment supplied by domestic vendors like Bhel. As per an industry estimate, Chinese suppliers have bagged 20-23% of contracts awarded for 75,000 mw out of the 100 giga watt capacity addition envisaged during the coming plan.

Domestic power equipment manufacturers like Bhel and L&T have been lobbying with the heavy industries ministry for imposition of import duty to curb imports of power equipment from China. The proposal was discussed at the high level of the government last year. But at that time, the ministries of power and finance opposed the proposal on the ground that the timing was not right. These ministries took the view any such proposal should be taken up for consideration during the 12 th plan, if at all.

In 2010, the Ministry of Heavy Industries set up a committee led by Arun Maira, member (industry), planning commission to probe complaints of domestic power equipment industry against cheaper Chinese imports. The committee recommended imposing 10% customs and 4% special additional duty on imports to level the playing field for domestic power equipment manufacturers. Later, a committee of secretaries, which was set up by the Government to examine Aruna Maira’s recommendations, suggested imposing 5% basic customs duty, 10% countervailing duty and 4% special additional duty.