No plans for new import duty on power equipment

Sources:

Economic Times (22 Apr 2010): No plans for new import duty on power equipment: Govt

FT (23 Mar 2010): China suspends India power projects

No new duty will be imposed on imports of Chinese power equipment, the government informed Parliament today. 

The combination of a shortage of power generation capacity and a dearth of practising engineers makes India an attractive market for Chinese power equipment manufacturers. Moreover Indian manufacturers are unable to match, at least for the moment, the pricing of Chinese equipment and the project execution capability brought in by these companies, thus leading to a one-sided contest. By some estimates Chinese equipment accounts for approximately 25% of newly installed capacity.

BHEL is the country's largest public sector power equipment player and manufactures units that can generate 10,000 MW of power annually. The company plans to take this capacity upward to 15,000 MW by the end of the current financial year. It is therefore no surprise that BHEL was demanding a 10 per cent customs duty on import of equipment for projects awarded through the international competitive bidding route and mega power plants. At present, 5 per cent customs duty is imposed on equipment imported for projects awarded through the ICB process, while there is no duty on power equipment sourced for mega projects with a capacity of 1,000 MW and above. 

While financing institutions have recently been nudging power producers towards installation of  Indian or Japanese equipment citing quality concerns and lower operational life, the significant cost advantages of Chinese equipment ensure that there is no change in this trend at least for the time being.