Power tariffs may go up by Rs 0.50 a unit if the Government decides to impose special duty on imported equipment, say private power producers.
Opposing the move, they have written to the Prime Minister and other senior Ministers, under the aegis of the Association of Power Producers, saying this will not only result in increased tariffs but will also delay capacity addition.
The Government proposes to levy Customs duty on import of power equipment with more than 1,000 megawatt capacity. There is speculation that the Cabinet Committee on Economic Affairs will consider the proposal this week.
Generation costlier
“Given the high import duty of over 20 per cent, and with rupee depreciation against all major currencies, the power tariff from all generation projects will go up by 30-35 paise a unit. At the consumer level, this will translate into an increase in prices by over 50 paise a unit,” they argue.
Though the Finance Ministry has favoured a 19 per cent duty (basic Customs duty of 5 per cent, countervailing duty of 10 per cent and special import duty of 4 per cent), the Commerce Ministry has sought 24 per cent (basic Customs duty of 15 per cent, countervailing duty of 5 per cent and special import duty of 4 per cent).
Even if the Finance Ministry's argument is considered, the effective rate of duty would be 20.94 per cent, cess included.
No level field
At present, power generation equipment for projects below 1,000 MW bears a duty of 5 per cent while there is nil duty on equipment for projects over 1,000 MW. The Arun Maira Committee had favoured a duty of 14 per cent, while a Committee of Secretaries recommended 19 per cent for larger projects.
The duty hike is being considered to help domestic equipment manufacturers. But the power producers say that domestic manufacturers are already burdened with a huge order-book, putting a severe constraint on their ability to supply within a given period.
The power producers say that projects in all the other process industries — refineries, fertilisers, oil and gas pipelines — while being subject to similar import duties on their end products, can recover a major portion of the duty through CENVAT. Hence, the effective import duty for these industries is only 5.47 per cent, while for power producers, it would go up to 20.94 per cent.
richam@thehindu.co.in