Levy higher duties on power equipment imports: Commerce Department

NEW DELHI: The commerce department has opposed power ministry's attempt to protect existing ultra mega power projects (UMPPs) from the proposed duty hike on imported power equipment. It has said the higher duties should be imposed on all imports from the day the Cabinet approves the proposal.

"In the Cabinet note on power equipment imports, the power ministry has proposed a carve out for all approved UMPPs stating that the import duties would not be applicable on orders already placed," a government official said. The commerce department feels this is not warranted, the official said.

The power ministry has proposed a 5% basic customs duty on power equipment imports, a 10% countervailing duty and a 4% value added tax in the Cabinet note to shield domestic manufacturers like BHEL, L&T and Bharat Forge against cheap imports from China. The commerce department has a point of dispute with the duties as well. It wants a 15% basic customs duty.

The cabinet is expected to take up the power ministry proposal on Thursday that has the support of the finance ministry. The commerce department wants import duties on all power equipment imports without any exemptions.

"With Chinese banks funding power equipment imports, it has become more lucrative for domestic power producers to import as no upfront payment has to be made," the official pointed out adding that this has to be discouraged.

Exemption for orders placed by existing UMPPs will be categorically opposed by the commerce department at the Cabinet meeting, the official said. Reliance Power's ambitious Sasan project has tied up a $1.1-billion loan from Chinese banks for equipment imports.

"The commerce secretary had pointed out at a meeting of committee of secretaries that it is the basic customs duty that has to be raised to give protection against imports as raising the CVD and VAT would mean higher local duties for domestic producers as well," the official said.