Upcoming power projects that have already placed orders for main plant equipment and paid some advance may be spared the proposed duty on imported equipment as the government does not want the levy to affect the investments in the works.The move will benefit power companies such as Reliance Power, Adani Power, JSW Energy, Sterlite Energy and Lanco, that have all placed equipment orders with overseas companies for some of their projects and are in process of completing the process for few new projects.The power ministry has moved a draft Cabinet note that proposes to levy a 5% custom duty, 10% countervailing duty (CVD) and 4% special additional duty (SAD) on equipment imports for all categories of power projects including mega and ultra mega power projects (UMPP).The government hopes the new levy will encourage investment in domestic equipment manufacturing capacities by making imported equipment expensive.
Mega power projects (1000 mw thermal and 500 mw hydro) will get exemption if they have already placed the order for equipment with overseas suppliers. Other projects eligible for mega policy benefits will get the exemption only if they have made 5% advance payment towards equipment imports.
“We will have to quicken the process of ordering equipment to get the duty incentives currently available for exports,” said an official of a leading private sector power producer.
The Cabinet note has also proposed to exempt all UMPPs and large power projects awarded on the basis of tariff, which have been awarded to the developers, from the new duty structure.
So far only four UMPPs — Sasan, Mundra, Krishnapatnam and Tilaiya — has been awarded while two other are in the bidding stage.Similarly, bulk tenders of NTPC (for 660 mw and 800 mw equipment for the PSU’s nine projects) and its Barethi project in Bundelkhand will also be exempt.
Out of the capacity addition of about 62,000 mw expected in the 11th Plan (2007-12), roughly 50% is to be supplied by Bhel and rest is being imported.
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