Even as the government has called a meeting on Thursday to re-examine the possibility of imposing duty on power equipment imports to level the playing field for the domestic industry, private developers have cautioned that such a move could end up increasing the cost of power generation and deter private investment into the sector.
Association of Private Producers (APP), a representative body of private developers, has opposed the plan to reconsider the proposal. ?Withdrawal of duty waiver on import of equipments, at this juncture, can 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. Consequently the gap between cost of service and revenue realization would widen further adding to the cash deficit/State subventions,? Ashok Khurana, director general, APP, said in a letter sent to power and finance ministries on Tuesday.
Heavy industry minister Praful Patel has called a meeting of power, finance and commerce secretaries on Thursday to discuss the proposal.. Besides, representatives from domestic power manufacturers will also attend the meeting.
Under the Government’s mega power policy, developers can import power equipment duty free. Private developers prefer Chinese power equipment which are 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.
?With the rupee depreciating against the dollar from Rs 42 to Rs 49 per US dollar, there has been an implicit duty for all imported equipment of almost 15%. With this, the domestic manufacturers should be able to compete much better with the imported manufacturers as their prices have gone up by 15% in rupee terms,? Khurana argued.
Domestic power equipment manufacturers like Bhel and L&T have been lobbying with the Ministry of Heavy Industries 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 too. 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 on imports to level the playing field for domestic power equipment manufacturers.
Under the government’s mega power policy, developers can import power equipment duty free. Private developers prefer Chinese power equipment which are 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.