Nearly 16 to 18 new mega power projects are expected to generate demand for three million tonnes of steel, primarily long products.

But the duty free regime might hit the domestic steel industry which is already mired in recession due to lack of demand, sources said.

The power plants are likely to have a combined capacity of 28,000 mw.

Steel Authority of India Ltd (Sail), a major player in the long products, contends that duty free imports could be allowed only if a particular variety was not available locally.

Sail sources said the domestic industry has excessive capacity to supply the steel required by these power projects.

Other major players affected due to the import policy are Tata Steel (TISCO) AND Rashtriya Ispat Nigam Ltd (RINL).

Though domestic steel makers can avail the ``deemed exports'' facility if they supplied to the power projects, the scheme had been made unattractive by the undue delay in reimbursing the excise duty charged on their products.

Under the scheme of deemed exports, the manufacturer who has to pay the excise duty in advance, however, gets refund later in terms of export incentive.

This anomaly could be checked if the steel manufacturers were allowed to supply steel free of excise duty, the sources said.

Sail sources said that domestic industry's demand for stopping duty free steel imports was not unjust because even the developed countries like the USA also do not allow their domestic industry to be affected due to such policies.

Earlier, the threshold limit for a power project to be considered as `mega' was 1,500 mw which was later reduced to 1,000 mw in case of thermal power. While in case of hydel power project, the limit remained 500 mw or above.

This resulted in increase in the number of mega power projects availing the facility of duty free steel imports, Sail sources said.