The Heavy Industries Ministry has sought doubling of basic customs duty on power generation equipment, as advised by the Arun Maira Committee.

Last year, the Government had decided to impose import duty on generation equipment for mega power projects and ultra mega power projects of 1,000 MW and above, wherein the basic customs duty was nil. It had then imposed a five per cent basic customs duty , 12 per cent countervailing duty and four per cent special additional duty, taking the total to 21 per cent.

Along with education cess, the final rate was effectively 22.85 per cent.
Effective protection

But if the Maira panel suggestion is implemented, the total duty on imported power equipment will come down to 14 per cent (plus education cess).

However, since the panel has recommended ‘nil’ countervailing duty , domestic manufacturers will not have to pay excise duty.

This means, domestic manufacturers will effectively have higher protection, since countervailing duty is imposed on imported items in lieu of excise duty paid by the domestic manufacturers, and the rate applicable is the same as excise duty.

The Indian Electrical and Electronics Manufacturers’ Association (IEEMA) had in fact said last year that the duty imposition had given an effective protection of only 4.7 per cent to domestic manufacturers vis-à-vis foreign manufacturers.

“The Arun Maira Committee had earlier recommended 10 per cent basic customs duty, zero per cent CVD and four per cent special additional duty , which would mean greater effective protection than the 4.7 per cent at present to domestic manufacturers, since they would also not have to pay central excise,” it had said.
Deemed export

The Maira committee has also recommended deemed export benefit to domestic manufacturers. According to the IEEMA, this will mean that if central excise is to be paid, then they will get a refund/drawback. Since this will not be applicable to foreign manufacturers, it can be taken as another benefit to domestic companies.

Last week, Heavy Industry Minister Praful Patel had written to the Prime Minister urging implementation of the Maira committee’s recommendations ‘immediately.’

His request came almost 11 months after the Finance Ministry notified the new duty regime for power equipment, which also exempted 111 projects from duty hikes.

These projects had already placed orders for power equipment on overseas suppliers, and together accounted for a bulk of the power generation capacity to be added during the 12th Plan period