Mega projects: Minister favours competitive bidding for supply

The Heavy Industries Ministry has pitched for 14 per cent import duty on power generation equipment for the projects above 1,000 MW. It claimed that the Power Ministry had already circulated a Cabinet note in this regard.

The Heavy Industries Minister, Mr Praful Patel, said, “Such a duty will provide a level playing field to domestic companies such as BHEL and L&T, which have significant disadvantage.” The move is primarily aimed at imports from China.

At present, equipment for power projects with capacity over 1,000 MW attract marginal duty. This makes imports cheaper and is the key reason for power producers, such as Reliance ADAG and Adani, going in for imports from China.

This is a blow to domestic producers, who are already facing slower order flow because of fewer projects being planned and executed.

“We have already involved the Prime Minister's Office in this matter, while the Planning Commission and the Power Ministry are already on board,” Mr Patel told reporters after his meeting with the Power Minister, Mr Sushil Kumar Shinde, on Monday.

Mr Patel later discussed the issue with the Prime Minister. Since the Union Budget is round the corner, the duty issue can be taken up there. But, this can be done even before the Budget, he added. He clarified that import of such equipment cannot be discontinued.

The Arun Maira Committee has favoured a duty of 14 per cent, while a Committee of Secretaries has recommended 9 per cent. Now, the Cabinet will take a final call.

The Heavy Industries Ministry also said that the procurement model for equipment for ultra mega power projects (UMPP) of 4,000 MW capacity should involve international competitive bidding (ICB).

At present, Indian power producers are not subject to the ICB route for UMPPs and procure power gear through bilateral arrangements. This, the Minister said, worked against domestic equipment makers.

“Manufacturers like Bharat Heavy Electricals Ltd now have the capacity and capability to produce the sets required for ultra mega power projects. So, what we are seeking is a bidding process for equipment supply for such projects,” he added.

(This article was published on January 23, 2012)
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