The power ministry has stuck to it its original proposal to levy a total of 21% import duty on power equipment despite changes sought by a host of central ministries seeking higher duty protection for the domestic engineering firms such as Bhel and L&T.

In a recent draft Cabinet note, the power ministry has retained the proposal to levy 5% basic customs duty, 12% countervailing duty (after the excise hike announced in the Budget to 12%) and 4% special additional duty on power equipment for all categories of projects bearing non-mega, mega and ultra mega tags. Cumulatively, the duty works out close to 23%, which power ministry feels is adequate disincentive for power producers to go for imported equipment.

The ministry has stuck to its stand despite opposition from the department of heavy industries that sought higher basic custom duty of 10% and special additional duty of 4% on power equipment as suggested by the Maira Committee constituted by the Planning Commission to recommend measures to provide level-playing field to domestic equipment industry.

The commerce ministry had also suggested an even higher basic customs duty of 15%, while Planning Commission, finance ministry and National Manufacturing Competitiveness Council have supported power ministry?s duty proposals.

?The earlier Cabinet note moved by the power ministry was withdrawn in March in view of the Budget being presented after few days. Meanwhile, fresh assessment of the earlier proposals were made and the original duty structure was considered best suited to protect the interest of the domestic industry,? said a power ministry source. The Prime Minister?s Office (PMO) has also asked the power ministry to float a new Cabinet note soon to levy duty on power equipment and put it up for fast track clearance.

?The depreciation of rupee against the dollar has already made equipment imports expensive by more than 5%. So there is no point to keep the basic duty higher,? said a private sector power producer asking not to be named.

In the draft Cabinet note, power ministry has also proposed that the new levy would be applicable from the date of the Cabinet approval, but would not apply to projects certified as mega power and provisional mega power projects before the Cabinet decision. Till date, 86 power projects envisaging over 1,32,765 MW have been granted mega status certificate, while other 25 projects of private sector totalling 32,450 MW have been issued provisional mega certificates.

Currently, power equipment attract 5% customs duty for projects of less than 1,000 MW capacity, while those above this threshold is exempt from the levy under a mega power policy that was announced to promote larger sized projects. If the government clears proposal on duty levy, mega power policy will cease to exist.

?The proposal to levy duty on power equipment is completely irrational and defeats the goal of providing cheap power to consumers,? Association of Power Producers? director general Ashok Khurana said.

He added that imported equipment were not only cheap but were coming with cheaper funding by banks in the exporting country and were also being delivered quickly allowing power projects to commission projects on time.