Private power producers have said that any move to impose further import duties on power equipment will not only increase capital costs, but also result in higher electricity tariffs.

The Association of Power Producers, in a letter to the Finance Minister, Mr Pranab Mukherjee, said implementation of the proposed imposition of customs duty on import of equipment will have a detrimental impact on capacity addition, and impede the ambitious target of the Government to provide power for all.

The producers cautioned that the imposition of further import duties would only increase the capital costs, which would have to be passed on through tariffs to the already overburdened State Electricity Boards.

Removal of entry barriers

They argued that there was a strong need for removal of entry barriers at all stages and an optimal pricing and tax strategy in place, so that resource allocation is based on operating market forces under a credible regulatory regime.

“…we urge the Government to keep this decision (imposition of duty) in abeyance as there does not appear to be any merit in increasing custom duties at this stage,” the association, a body representing private power companies in the country, said.

The letter further states that the sharp rupee depreciation against the Chinese yuan in the past one year, has already made imports costlier.

There has been an implicit duty of 15-17 per cent on equipment and machinery imports against the recommendation of 14 per cent duty, which was recommended by Maria Committee in February 2010.

A meeting on the issue has been called by the Finance Ministry on February 6.

>richam@thehindu.co.in

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