Taxing Power Gear Imports could be Fatal, Warn Private Companies.

NEW DELHI: Private power producers have cautioned the government that any move to tax power equipment imports can cripple India's capacity-addition programme as companies are already struggling with high fuel costs, low tariffs and inefficient state utilities. The government is scheduled to consider the demand of state-run equipment supplier Bhel, which says it faces unfair competition from cheap imports but power producers say that protectionist measures to support the government-controlled company can severely hurt the sector.

"Withdrawal of duty waiver on import of equipments, at this juncture, can further aggravate cost pressures and lead to a serious impact on project pipeline. Imposing customs duty therefore is likely to have adverse implications for the capacity addition programme and financials of the sector as it is likely to increase cost of power," Ashok Khurana, head of the Association of Power Producers said in a letter to top government authorities. The association represents private firms with a total portfolio of 120,000 mw.

The issue will be debated by the top officials representing ministries of power, heavy industries, finance and the Planning Commission on Thursday. Several top power companies, including Anil Ambani-controlled Reliance Power, have placed orders for Chinese equipment. Apart from competitive costs, Chinese equipment is delivered in about three years, while Bhel takes four to four-and-a -half years, power producing companies said.

Another attraction for imported equipment from China, Korea or other countries is the low-cost funding that is available with such purchases. "Import of equipment support financing from Export Credit Agencies which can take care of almost 50% of the project costs while at the same time reducing the borrowing costs significantly is of great benefit to the Sector. Why forsake such benefits?" the association said. It said the power sector was facing challenges such as fuel supply, financing, weak finances of state utilities.

Source : economictimes.indiatimes.com