During the XI Plan period,
thermal capacity of 43,072
mw is envisaged to be
commissioned. Out of this, 56 per cent
will have BHEL equipment and
balance 44 per cent is from foreign
suppliers, with approximately 85 per
cent from Chinese suppliers. For the
XII Plan, approximate 37,626 mw of
power capacity of equipment
contracts has already been placed
with Chinese vendors.
The domestic equipment
manufacturers, despite benefiting
from deemed export status available
for supply of equipment to mega
power projects, are required to pay
additional duties/ taxes such as sales
tax, VAT, entry tax, etc. Such
duties/taxes are not applicable to
supplies from foreign manufacturers
who also enjoy various forms of
incentives and subsidies in their
host countries.
The domestic industry is at a
disadvantage on account of such levies
paid to the central/ state governments.
Hence, in the absence of a level playing
field, competing with foreign
suppliers, especially Chinese, threatens
the long-term prospects of the
domestic industry. Also, dependence
on foreign suppliers increases the risks
of availability of spares and after-salesservices
for the plants using such
imported equipment.
The Planning Commission had
constituted Maira Committee to
suggest options and modalities for
addressing the disadvantages
suffered by the domestic power
equipment manufacturers. The
Committee has recommended
imposition of 14 per cent duties on
import of power equipment (10 per
cent custom and 4 per cent special
additional duty (SAD)) for mega
projects. The Committee has
envisaged an increase of 1-2 per cent
in power prices and suggested that
the same can be absorbed through
improved efficiencies. It is also of
the view that the move will help
striking a balance between
protecting domestic industry and
the need to import equipment to
boost power production.
A Committee of Secretaries from
MHI, MOP and MOC proposed to
levy 19 per cent duty (5 per cent
customs duty, 10 per cent
countervailing duty and a SAD of 4 per
cent) on imported power equipment.
IMPACT OF THE
PROPOSED DUTY
The planned capacity addition for
the XII Plan period is 75,000 - 100,000
mw. This calls for a robust
domestic BTG manufacturing
capacity compli-mented by strong
import arrangements.
Though the news of imposing
higher duty on imported power
equipment is encouraging for
domestic manufacturers, it may put a
spanner in the works for IPPs planning
to source Chinese equipment.
BHEL, the domestic leader in BTG
equipment manufacturer, is
augmenting its manufacturing
capacity from 15,000 mw per year to
20,000 mw per year by March 2012, to
meet the increasing demand for
power equipment.
In addition, several joint ventures
like L&T-MHI, Bharat Forge-
Alstom, Jindal-Toshiba etc. have
been set up in the country for
manufacture of supercritical boilers
and turbine generators.
A total manufacturing capacity of
about 27,500 mw for boilers and 28,500
mw for turbine generators is expected
to be available in the country from the
domestic manufacturing industry.
There is a need for balancing the
extent of import duty with the
objective of meeting target capacity
additions. The duty structure as
proposed by the Maira Committee is
favourable to the domestic BTG
industry as it puts in place an upfront
barrier of 10 per cent customs duty
followed by 4 per cent SAD on BTG
imports. However, given the twin
requirement of the need of capacity
addition to meet the growing power
demand and the necessity of
protecting the domestic BTG industry,
the duty structure as recommended by
the Committee of Secretaries offers a
way out. It imposed a customs duty of
5 per cent on imports of BTG
equipment with additional 10 per cent
as CVD and 4 per cent as SAD.