Why Budget 2012 is so crucial for L&T, Bhel

Amidst conflicting pulls and pressures from the power generating firms and equipment manufacturers, the government is likely to impose 10 to 12 percent duty on imported power gears in the Budget for the next fiscal.

“The Department of Economic Affairs has asked the Revenue Department to take decision on the proposed levy, which may be 10 -12 percent,” sources in the know told reporters.

Even though the Department of Heavy Industry (DHI) and the Power Ministry are in favour of 14 percent import levy, DEA believes that 10-12 percent duty is adequate, they said, adding the specifics are being worked out.

According to DEA, higher duty structure would not only send a wrong signal to the global investors, but may also lead to increased cost of generation.

The argument is also being advanced by the power generating firms, particularly in the private sector.

The committee headed by Planning Commission Member Arun Maira had suggested imposition of 10 per cent customs duty and 4 per cent special additional levy.

At present, projects with less than 1,000 MW generation capacity attract 5 per cent import duty while the rest enjoy duty-free import of equipment.

The proposal to impose higher duty on imported power equipment follows demand a level-playing field to domestic companies such as BHEL and L&T. These firms are facing stiff competition from cheaper overseas gear mainly from China.

Many private entities such as Reliance Power and Adani Power have placed orders for equipment from China and other countries.

PTI