Power equipment should attract lower excise duty

Electricity tariffs in India are rising fast because of higher fuel prices, which account for about 50% of the generation cost. Rising tariffs would impact the competitiveness of Indian industry, for which electricity is a key input.The Centre, meanwhile, plans to amend the existing policy that provides for duty concessions for procurement of equi- pment for mega power projects. The Union Cabinet is expected to take a call on this soon.

Many private players are setting up supercritical power equipment facility in India to benefit from the government's policy to encourage indigenous capacity addition. An investment of Rs 10,000 crore is expected in the sector. In this context, the government's proposal to impose a 5% customs duty is understandable as it aims to provide a level-playing field to domestic power equipment manufacturers against import.The government follows a similar policy in many other sectors as part of its strategy to attract private investment. So there is nothing wrong with this policy so long as it does not hurt domestic consumers.However, the proposal to impose a 10% countervailing duty and 5% special additional duty on power equipment does not make sense.It is because these duties will be applicable to both domestic and imported equipment and will add to the generation cost. This is not in line with the government's stated policy to promote the domestic manufact- uring sector.

Any slowdown in the manufacturing sector would affect job generation. The government needs to create new jobs for the growing population. While India's services sector is doing well, its ability to create new jobs is limited. The dependence on the agriculture is already high and there is not much scope for creating new jobs. Manufacturing is the only sector which offers hope of large-scale employment generation.However, the manufacturing sector is already suffering from infrastructural bottlenecks. It is already bearing the burden of state governments' policy to subsidise electricity supply to agriculture consumers. If electricity tariffs rise at the current pace, the manufacturing sector might find the subsidy burden unbearable.