India Considers Imposing 14% Import Tax on Power Gear.

NEW DELHI – India’s power ministry is seeking a 14% tax on imported power-generation equipment, in line with the demand of local manufacturers to help them compete with suppliers from countries including China, two officials with direct knowledge of the matter said.

India levies a 5% tax on imported equipment for most power projects. Imports for large plants–such as coal-based units of 1,000 megawatts and more–and projects located in certain regions are tax free.

Local power-gear manufacturers such as Bharat Heavy Electricals Ltd. and Larsen & Toubro Ltd. have been seeking to raise the import tax so that their products can compete with cheaper imports.

The ministry has recently sent its proposal to other concerned ministries for their views, the officials said late Monday.

“We may get the comments from the ministries in a few weeks,” one of them said, adding that the power ministry may send the proposal to the federal cabinet in January.

The officials, both from the power ministry, didn’t want to be named.

The move to raise the tax comes as the South Asian nation pushes ahead with its goal to add about 117 gigawatts of power in the next five-six years to light millions of rural households and help cities fight frequent blackouts.

The massive capacity addition program will need equipment worth billions of dollars, an opportunity global and local power-gear makers are keen to tap.

Chinese power-equipment manufacturers have already received several orders from Indian project developers as local capacity is inadequate and products are comparatively more expensive.

Reliance Power Ltd., for instance, last year signed a $10 billion agreement with Shanghai Electric Group Co. to buy power-generation equipment and related services for its various projects.

A committee of the Planning Commission, the government’s top think tank, last year recommended a 14% tax on imported power equipment to protect local manufacturers and give them a level-playing field.

Heavy Industries Minister Praful Patel also supported the move on Nov. 3, citing the huge capacity addition plans of local manufacturers.

Source : blogs.wsj.com