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Category: Global Economy Sub-category: Indian Economy
Document type: news
The commerce department has opposed power ministry's attempt to protect the existing ultra mega power projects (UMPPs) from the proposed duty hike on imported power equipments. It has said that the higher duties should be imposed on all imports from the day the Cabinet approves the proposal.
In a Cabinet note on power equipment imports, the power ministry has proposed a carve out for all approved UMPPs stating that the import duties will not be applicable on orders already placed. The commerce department feels this is not warranted, stated the note.
The power ministry has proposed a 5% basic customs duty on power equipment imports, a 10% countervailing duty and a 4% value added tax in the Cabinet note to shield domestic manufacturers like BHEL, L&T and Bharat Forge against cheap imports from China. The commerce department has a point of dispute with the duties as well. It wants a 15% basic customs duty.
The cabinet will take up the power ministry proposal on 1st march, 2012. It has the support of the finance ministry. The commerce department, however, wants import duties on all power equipment imports without any exemptions.
According to the power ministry, exemption for orders placed by existing UMPPs will be categorically opposed by the commerce department at the Cabinet meeting. Reliance Power's ambitious Sasan project has tied up a $1.1-billion loan from Chinese banks for equipment imports.
The commerce secretary has pointed out at a meeting of committee of secretaries that it is the basic customs duty that has to be raised to give protection against imports as raising the CVD and VAT would mean higher local duties for domestic producers as well.
However, private power producers, including Reliance and Tata Power, have written to Prime Minister saying that imposition of higher duty on imported equipment will result in increased electricity tariffs and will hurt the sector.
The letter to the Prime Minister comes amid government reportedly planning to slap higher import duty on power gear. According to the Association of Power Producers (APP), there are some reports suggesting the government is moving ahead with the imposition of customs duty on imports of equipment for power projects.
Moreover, the domestic power sector is grappling with multiple woes including fuel scarcity, rising coal prices and environmental hurdles.
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Ultra Mega Power Projects (UMPP) are a series of ambitious power projects planned by the Government of India. With India being a country of chronic power deficits, the UMPP each with a capacity of 4000 megawatts or above, are being developed with the aim of bridging this gap.
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