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10-12% duty on imported power gears likely in Budget 2012

Taking cognizance of the recent demands made by the domestic power equipment manufacturers, the Department of Economic Affairs (DEA) has asked the Revenue Department to take decision on increasing import duty on power equipment. It has proposed that the duty be increased to 10-12% as compared to the demanded 14% by domestic players.

On the other hand, the Department of Heavy Industry (DHI) and the Power Ministry are in favour of 14% import levy, DEA believes that 10-12% duty is adequate, they said, adding the specifics are being worked out. By adding further it said, higher duty structure would not only send a wrong signal to the global investors, but may also lead to increased cost of generation.

Domestic power equipment manufacturing companies such as BHEL and L&T have been facing stiff competition from cheaper imports of power gear from foreign nations, especially China. Many private entities such as Reliance Power and Adani Power have placed orders for cheap equipment from China and other countries and hence domestic companies are keen that import duty be hiked to 14% to protect national players.

Currently projects with less than 1,000 MW generation capacity attract a 5% import duty while the rest enjoy duty-free import of equipment.

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