Importing power equipment & the duty to be imposed

The Chinese top the list,followed by the South Koreans and the Russians.

Written by The Indian Express | Published:February 22, 2012 1:55 am

At a time when the Government is planning to levy a new duty on imported power equipment,we take a look at the possible impact of the move:

1. What is the kind of power equipment that’s imported?

Main plant equipment,essentially boilers and turbines,make up for a major chunk of the power gear imports happening currently. Most of this is from China,with state-owned firms such as Dongfang Electric Corporation,Shanghai Electric,Sichuan Machinery and Equipment and Shandong Electric Power Construction Corp cornering a bulk of the equipment orders. So far,during the current Plan period,orders about 33,000 MW have already been placed on Chinese vendors,which translates into around 34 per cent of new equipment orders for additional capacity placed during the five year period.

2. Which are the countries from where imported power equipment comes into India?

The Chinese top the list,followed by the South Koreans and the Russians.

3. Who are the major importers?

Reliance Power,Adani Power and Lanco are the top three importers of Chinese equipment for their power projects in India.

4. What is the current duty structure?

Import for thermal projects with less than 1,000 MW generation capacity attracts a 5 per cent duty. Thermal projects of over 1,000 MW capacity,categorised as mega projects,enjoy duty-free equipment imports.

5. What is the new proposal?

The government plans to impose a 5 per cent basic customs duty,4 per cent additional import duty and 10 per cent countervailing duty (CVD) on imported power gear for mega projects,making it a total of 19 per cent.

6. What is the government’s justification for the move?

The domestic industry is getting hurt as equipment manufacture by domestic firms such as BHEL and L&T are subjected to both excise duty and sales tax. Imports for mega projects,on the other hand,come in duty free,thereby resulting in a duty disadvantage for the domestic power gear manufacturers.

7. If duty is imposed,how will it affect imports?

While the proposed duty is expected to make imports more expensive,the impact is not likely to much. The net effect on affected equipment imports would be only 5 per cent,since CVD is imposed in lieu of excise duty being paid by domestic manufacturers and additional duty is in lieu of sales tax.

8. Will the proposed import duty affect power cost?

While private player have said the levy of the customs duty on imported power equipment will “increase the cost of power generation and delay capacity addition”,most analysts maintain that the net effect of the proposal would be a duty impact of only 5 per cent for equipment for mega projects

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