Duty on imported power gear will push up tariffs: RPower

Observing that the power sector is going through stressful times, Reliance Power today said slapping import duty on foreign equipment will push electricity tariffs higher.

The government is planning to impose a 14% duty on imported power equipment, especially from China, as part of efforts to provide a level-playing field for domestic gear-makers such as BHEL and L&T.

"Imposing duty on imported equipment would push up the overall tariffs," Reliance Power Chief Executive Officer J P Chalasani told PTI.

Reliance Power's existing 1,200-MW Rosa plant in Uttar Pradesh is using equipment from China and the company has also placed orders with Chinese entities for many of its upcoming projects. Rosa plant currently has 900 Mw of capacity commissioned and the remaining 300 Mw is expected to be ready by March, 2012.

"The power sector is stressed due to various factors... There is pressure on tariffs. It would not be right to impose duty on imported power equipment," Chalasani said here.

"Tariff is a function of the market," he noted.

The power sector, which has embarked on ambitious capacity addition plans, is grappling with a slew of problems, including fuel shortages, financing issues and the poor financial health of distribution companies.

At present, projects with less than 1,000 MW of generation capacity have to pay 5% duty on equipment imports, while those above this limit enjoy duty-free imports.
    
A committee headed by Planning Commission Member Arun Maira had also suggested the imposition of a 10% customs levy in addition to a 4% special additional duty on imported power equipment.
    
The Association of Power Producers (APP) -- a grouping of 14 entities, including Reliance Power, Tata and Essar -- had recently opposed the proposal to impose duty on imported gear.
    
In a letter to Finance Minister Pranab Mukherjee, APP Director General Ashok Khurana said that import duty would add to the capital cost of a power plant and make power costlier for end-consumers.
    
The advantage of sourcing power equipment from offshore vendors is that they also offer cheaper External Commercial Borrowings, APP had said.