Power ministry to move fresh Cabinet note for 21% duty on equipment import

The power ministry is likely to move a fresh Cabinet note next month for the imposition of 21 per cent duty on the import of power equipment.

Last month, the government had deferred a proposal to impose 19 per cent duty on such import. The proposal is meant to create a level field for domestic manufacturers.

The previous note included five per cent basic customs duty, 10 per cent counter veiling duty (CVD) and four per cent special additional duty (SAD). However, after the increase in excise duty, the CVD would also be raised. A senior power ministry official said the proposal would be sent to the cabinet and was expected to be cleared next month.

The ministries of power and commerce have suggested a levy of 19 per cent on the import of power equipment, while the heavy industries ministry has recommended one of 14 per cent. A committee headed by Planning Commission member Arun Maira had, in its report, suggested the imposition of 14 per cent.

Currently, equipment imported for projects with a capacity of less than 1,000 Mw attract five per cent customs duty, while those imported for projects with a capacity of more than 1,000 Mw enjoy exemption, according to the government's mega power policy that is aimed at rapid build-up of capacity to meet the country's burgeoning energy demand.

The domestic private power industry has opposed any move to levy the import of power equipment, saying this would hit investments and impede capacity addition in the sector.

Association of Power Producers director-general Ashok Khurana had, in a letter to the prime minister, written, “We urge the government to keep this decision in abeyance, as there does not appear to be any merit in increasing the customs duty at this stage.” Currently, Bharat Heavy Electricals Limited imports 28 per cent of its raw material, components and stores & spares demand from outside the country. The move to impose import would, therefore, raise input costs and, in turn, power prices, he had said.