The Hindu Business Line : Duty cut on import of capital goods for captive power plants likely

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New Delhi Feb. 14 The Budget for 2006-07 may bring cheer to many standalone companies and corporate groups who are contemplating setting up captive power plants to meet their requirements instead of depending on uncertain supplies from the State\electricity boards or through the national grid.

In order to encourage industrial units achieve self-sufficiency with respect of their power requirements, the Government is examining the option of reducing customs tariff for captive power plants and their spare parts from the existing 12.5 per cent to 5 per cent.

As of now, import of all capital goods required for setting up small and medium power project attracts a 12.5 per cent duty. However, taking into account a 16.32 per cent countervailing duty and an additional 4 per cent special countervailing duty, the net effect comes to 36.73 per cent.

The proposal under examination is to bring down import duty on all capital goods imports for setting up small and medium captive power plants. However, the plan does not include similar exemption for non-captive units even though they might qualify to be small and medium sized units.

The Finance Ministry has begun the exercise following recommendations from the Ministry of Chemicals and Petrochemicals.

The move is likely to help chemical manufacturers in particular as the chemical industry is a heavy user of power, which is required to catalyse their various processes. Moreover, since the industry has a very large number of units spread across the country, off late many of them have expressed plans to set up captive power plants because of the uncertainties in supplies leading to production breaks.

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