Equipment import for UMPPs may attract duty.

NEW DELHI: The finance ministry is considering to impose import duty on power equipment for the ultra mega power projects (UMPP). The move may lead to increase in tariffs of power generated from these projects. It is learnt that the government is likely to move the proposal to the Cabinet after the present session of Parliament.

At present the import of power equipment for UMPPs does not attract any duty, to give a fillip to powergeneration in the country, which is key to achieve a high economic growth on a sustainable basis.

Association of Power Producers (APP) has opposed the move and written a letter to Prime Minister Manmohan Singh. The letter said that imposition of customs duty has ‘‘serious implication on the cost structure and tariffs". It further pointed out that the move can seriously impact the capacity addition programme being planned by the private sector.

As against a capacity addition target of around 20,000 MW in each of the 7th, 8th, 9th and 10th Five Year Plans, India is gearing up to add around 20,000 MW each year. In the first three years of the 11th Five Year Plan around 30,000 MW capacity has been added. APP in its letter has said that after imposition of import duty, the tariffs will rise. ‘‘The tariffs for all the competitive bid projects may have to be adjusted upwards for such a levy,'' it said.

At present, the total duty — including import, counter veiling and others —on power equipment for projects other than UMPPs is around 21%. Now, the government wants to levy similar import duty on UMPPs too.

In its letter, APP said that limited availability of power plant equipment in the country is a major constraint. The delay in supplies by domestic equipment manufacturers increases the implementation time. To expedite implementation of large power projects, the government exempted import of equipment for UMPPs from customs duty.

However, a source in the government said the decision to give duty exemption to imported equipment created an uneven field for the domestic manufacturers. But, a senior official at APP argued that the supply of power equipment by domestic players to UMPPs is also exempted from all taxes. Therefore, he said this move will only lead to increase in tariffs and delay in implementation of the projects.

Source : timesofindia.indiatimes.com