Call for duty waivers

Private power industry wants an exemption from 5 per cent customs duty on imported coal and extension of customs duty benefit for mega power projects for the next five years. The sector is asking for the demands to be met in Budget 2012-13.

Under the Mega Power Policy, mega power projects — 1,000 Mw and more — and ultra mega power projects of 4,000 Mw are exempted from paying Customs duty and excise duty. The industry has also asked for exemption from Customs duty on low-voltage power transmission projects. High- and low-voltage transmission projects attract 2.5 per cent customs duty and 10 per cent countervailing duty, which increases input costs of such projects.

India is reeling under historic coal shortages, of 80 million tonnes, annually. While the coal crunch has made imports inevitable, it has pushed up input cost to unmanageable levels, rendering power business economically unviable, the industry alleges.

“Presently, 5 per cent customs duty and also huge ocean freight logistics cost makes imported non-coking coal unviable by way of increased costs,” the Association of Power Producers said in a recent letter to the Finance Ministry. The association is a representative body of 22 private power companies.

“The Customs duty benefit under the Mega Power Policy should be extended for the entire 12th Plan period,” the letter states.

The increased input cost has made honoring power sale and purchase agreements difficult. “As there is no alternative, it will be difficult for developers to supply power in agreed Power Purchase Agreement (PPA) rate,” the letter added.

The industry has sought the exemption in line with the policy to grant incentives to mega power projects.

The mega power policy was announced in 1995 to encourage setting up of large-size power projects. The policy was modified in 1998, 2002, 2006 and last amended in 2009.