Comments
The proposal to impose customs duty on import of power equipment with more than 1,000 megawatt capacity may find its way in the Budget, even as it was withdrawn from the Cabinet on Thursday.
The Budget is scheduled to be presented on March 16. While opinions differ on the exact reason for withdrawal of the proposal, official sources said that there were differences over the quantum of duty.
While the Power Ministry is believed to have recommended 19 per cent import duty on equipment for large projects, the Commerce Ministry favoured 24 per cent duty. The Power Ministry's proposal was favoured by the Finance Ministry.
The proposal before the Cabinet was to consider 19 per cent duty on power generation equipment for projects with capacity of 1,000 MW and above.
Sources said that discussion for including the proposal in the Budget would start soon. However, a formal decision will have to be taken by the Finance Minister. The official also indicated that the proposal for duty hike may come with provision for set off against the countervailing duty (CVD).
A CVD is levied on imported goods in lieu of excise duty, if, it is being imposed on the same domestic product. This is done to protect the domestic industry. The proposal is to levy 10 per cent CVD. Since electricity is an exempted item, there is no set-off available.
With the proposal of basic custom duty at the rate of five per cent, CVD at 10 per cent and special import duty at four per cent, the total duty comes to 19 per cent on power generation equipment for project with over 1,000 MW capacity. If cess is added, the effective duty would be 20.94 per cent.
Non-availability of the setting-off provision has worried power producers, who were anyway unhappy with the move of levying import duty. If the setting-off provision is made available, the effective rate would be around 11 per cent.
On February 27, private power producers wrote to the Prime Minister saying that imposition of import duty will not only result in higher tariffs but will also delay capacity addition.
At present, power generation equipment for projects below 1,000 MW bear a five per cent duty, while there is nil duty on equipment for projects over 1,000 MW. The Arun Maira Committee had favoured a 14 per cent duty, while a Committee of Secretaries favoured 19 per cent for larger projects.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.