DGFT to allow import of power equipment

Seeks industry views on meeting export obligation

Close on heels of India’s commercial export of power to Bangladesh and proposed export to Pakistan, the Directorate General of Foreign Trade has in principle decided to allow import of captive plants and power generation sets under EPCG.

However to this effect, it has started industry wide consultation to ascertain as to how the industry proposes to fulfill its export obligations which is an essential norm of the EPCG scheme.  Sources said, if the industry could present a viable plan to meet the export obligation , these imports could also impact the power prices in the domestic market.

EPCG, or Export Promotion of Capital goods, is an export promotion scheme which allows import of capital goods including spares for pre production, production and post production at zero duty subject to an export obligation of six times of duty saved on capital goods imported under the EPCG scheme  over a period of six years  from the authorization date.

Till now, import of captive power plants and power generator sets is disallowed under Export Promotion Capital Goods (EPCG) scheme since export of power was not feasible. However according to official sources, the power manufacturing industry is of the view that uninterrupted supply of quality power at competitive rates is essential for production activities and maintaining export competitiveness. According to the representations, import of capital goods under EPCG scheme at concessional duty reduces the overall cost of setting up of a power plant which in turn reduces the cost of power and ensures uninterrupted power supply.

However DGFT has made it clear it could allow import of captive power plants and power generation set provided the power manufacturers submit a detailed plan as to how they will fulfill the export obligation. Sources said that since power is mostly a non exportable commodity, fulfilling of the export obligation needs a methodology. In fact the DGFT has suggested that imputed value of power in the export products could serve as total export able commodity.

Imputed value of an item is a guesstimate used to ascertain the value of an item where actual values are not available.   Meanwhile, captive power plant is used for in house power generation not for selling power to the electricity boards.

Recently, India started export of power to Bangladesh through a 125 km transmission line, 40 km situated in Bangladesh. As per the agreement, India will export 500 MW of power to Bangladesh over a period of 35 years.