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Power Min To Float Note On Higher Tax On Imported Gear

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The Prime Minister's Office on Wednesday directed the Power Ministry to float a fresh proposal on slapping higher duty on imported power gear, a move aimed at cushioning domestic manufacturers such as BHEL and L&T against cheap imports, mainly from China.

Sources said the Power Ministry is likely to suggest the quantum of overall levy on overseas gear at 19 per cent, as proposed in the earlier Cabinet note. With the government raising the excise duty by 2 per cent to 12 per cent in the Budget, total levy would be 21 per cent, they added.

"The Power Ministry will send to the Cabinet a new note to impose (higher) duty on imported power equipment, and it is expected to be taken up in the next 20 days," an official said after attending the PMO meeting.

Principal Secretary in the PMO, Pulok Chatterjee, who chaired the meeting is understood to have asked Power Ministry to prepare a fresh Cabinet note.

The meeting was attended by officials of ministries of finance, power and heavy industries.

Currently, equipment imported for projects of less than 1,000 MW capacity attract five per cent customs duty while those above that are exempt. There are demands to slap higher duty on overseas power gear to provide a level-playing field for domestic manufacturers.

In May, the Cabinet had deferred the proposal to raise the duty on imported power gear.

The ministers of power and commerce had suggested 19 per cent levy, while the Heavy Industry Ministry recommended a duty of 14 per cent.

The three ministries had differences on the quantum of basic customs duty that can be slapped on overseas power gear.

While the Power Ministry pitched for five per cent customs duty, Commerce and Heavy Industry Ministries sought 15 per cent and 10 per cent, respectively.

A committee headed by Planning Commission Member Arun Maira in its report had suggested imposition of 14 per cent levy -- with a customs duty of 10 per cent.

Meanwhile, the Coordinating Committee of Secretaries (CCoS) had pitched for 19 per cent levy on imported power gear including five per cent customs duty.

Association of Power Producers (APP), a body representing major private power producers, said that any hike in customs duty on import of power equipment would lead to increase in electricity tariffs and would also be a major impediment to inclusive growth.

In a letter to the Power Ministry, the association said the import of equipment for power projects has been a major contributor in the capacity addition in the 11th plan, accounting for almost 50 per cent of the coal-based capacities.