FinMin opposes import duty on power equipment

The Finance Ministry is believed to have disfavoured the imposition of import duty on power equipment for ultra mega power projects (UMPPs) for now -- a move that could benefit private players that are looking to source equipment from abroad.

Sources said the Finance Ministry has decided against the imposition of import duty after consultations with the Power Ministry and public sector equipment major BHEL, besides representations made by private sector players through the Association of Power Producers.

The Ministry of Finance has accordingly communicated its stance to the Power Ministry, the sources said.

The Finance Ministry is of the view that any changes in the duty regime should only take place in the 12th Plan Period (2012-17) after reviewing the progress of capacity addition projects in the power sector and domestic manufacturing capabilities.

This would mean that power companies will continue to enjoy duty exemption on the import of power equipment for UMPPs till the end of the Eleventh Five-Year Plan (2007-12) on March 31, 2012.

Under the Mega Power Policy, imports of equipment for thermal projects with a capacity of 1,000 megawatts (Mw) and above and hydel plants of more than 500 Mw are exempted from excise and customs duty.

Earlier, the Ministry of Power had proposed imposing a 10 per cent import duty on power equipment, besides a 5 per cent countervailing duty and a 4 per cent special additional duty.

Domestic equipment makers like BHEL and L&T are said to have favoured the imposition of duty on power equipment imports to create a level-playing field for homegrown companies in the backdrop of cheaper imports from other countries.

However, private power suppliers like Reliance Power and Tata Power have opposed the duty, as they aim to import equipment for their respective UMPPs from countries like China.