Govt may provide duty sops to domestic power equipment cos.

NEW DELHI: The government may consider duty concessions on power equipment to create a more level playing field for domestic manufacturers hit hard by cheap Chinese imports at zero duty.

An empowered government committee would meet by month end to examine the option of duty concessions to domestic power equipment manufacturers, sources in the know said.

The problem of domestic manufacturers, including BHEL and Larsen and Toubro, is accentuated by 14 per cent cost advantage due to nil duty imports.

BHEL has been demanding imposition of anti-dumping on Chinese equipment.

According to sources, pressure is building on the government to act fast to safeguard the interests of the Indian industry, especially with respect to Chinese equipment suppliers who have a clear 14 per cent advantage over domestic manufacturers.

Over and above this clear 14 per cent advantage, Chinese companies also fare better price-wise due to a grossly undervalued Renminbi or the Chinese Yuan.

While considering a note submitted by the Ministry of Power (MoP) on modifications to the Mega Power Policy, the Committee of Secretaries (CoS) in August 2009 had decided that a Committee be set up under the Planning Commission, with the Department of Heavy Industry (DHI), MoP and the Department of Revenue (DoR) as Members, to suggest options and modalities to take care of the disadvantages suffered by the domestic power sector firms.

However, the Power Ministry is of the view that any such options cannot be implemented before the start of the next Plan period (April, 2012), as the orders for equipment during the current Plan period (2007-12) have already been placed and these modalities may hamper the capacity addition programme.

Power Ministry says that in case measures to create a more level playing field for domestic manufacturers are not immediately notified, not only will the disadvantages faced by domestic manufacturers be perpetuated, but the development of domestic manufacturing capacities would also be seriously impeded, and new investors may withdraw further investments.

One of the recommendations made by the Committee in its report of February 2010 is that the extent of disadvantage that needs to be bridged is about 14 per cent and that this can be achieved by a 10 per cent customs duty and 4 per cent Special Additional Duty (SAD).

Source : The Economic Times