FM upholds PowerMin plea not to impose duty on Chinese equipment

Overrules Planning Commission, heavy industry ministry recommendations.

The Union power ministry, striving to achieve at least 62,000 Mw of the total capacity addition target of 78,700 Mw by the end of the 11th Plan (2012), has succeeded in convincing Finance Minister Pranab Mukherjee not to impose import duty of 14 per cent on Chinese power equipment.

The power ministry was a strong opponent of such a duty. It had argued that the duty would hamper both ongoing projects and those in the pipeline. Chinese power equipment is cheaper than the Indian ones by 10-15 per cent.

A committee headed by Planning Commission member Arun Maira, in a recent report, had made a strong recommendation to impose the 14 per cent duty on Chinese power equipment. This was to provide a ‘level playing field’ to local manufacturers, including state-run Bharat Heavy Electricals Ltd (BHEL). Both, the ministry of Heavy Industries and Public Enterprises and BHEL had pressed this demand with the finance ministry.

A senior power ministry official told Business Standard: “The Finance Ministry has upheld the power ministry’s argument that imposition of import duty on Chinese power equipments can be considered only after the completion of the 11th plan (2011-12) and in the beginning of the 12th plan (2012-13). This was because, currently, thermal capacity of 21,055 Mw for the 11th Plan (out of which 2,865 Mw has been commissioned) and 13,870 Mw for the 12th Plan has been ordered on Chinese manufacturers.”

The official said another reason to consider imposing import duty only after commencement of the 12 th plan was that by then, various joint ventures (Jvs) formed by Indian companies with foreign partners for production of power plant and equipment would be commissioned.

The JVs include L&T-Mitsubishi for boilers (4,000 Mw), Bharat Forge & Alstom for turbine generators (5,000 Mw), JSW-Toshiba for turbine generators (3,000 Mw) and GB Engineering-Ansaldo for boilers (2,000 Mw).

Moreover, BHEL, with an order book of over Rs 125,000 crore and a manufacturing capacity of 10,000 Mw, is currently involved in increasing it to 20,000 Mw by the end of the 11th plan. BHEL has been under attack for delay in supply of both main power plant and other equipment.

The official said the Central Electricity Authority (CEA), in a recent communication to the power ministry, had said Chinese equipment was as good as indigenously manufactured ones and the deliveries were much faster, with no delays.