India to impose 10 percent import tax on big power projects
August 12, 2010

Imports of power equipment to India from countries, mainly China, are becoming increasingly cheaper, damaging domestic manufacturers, as a result, New Delhi has taken a decision to impose a 10 percent import tax on big power projects effective in a few weeks. The tax seeks to reverse a policy of zero import duty on equipment for mega projects introduced to meet India’s urgent capacity shortages, said Arun Maira, a member of the government’s Planning Commission who led a committee on equipment imports told Reuters. Currently, 5 per cent customs duty is imposed on equipment imported for projects awarded through global bidding, while there is no duty on power equipment sourced for mega projects with a capacity of 1,000 MW and above.

The move is to enable domestic Indian power equipment manufacturers such as Bharat Heavy Electricals Ltd and Larsen & Toubro Ltd to operate in a level playing field. Until now Chinese power equipment manufacturers such as Shanghai Electric Group Co. Ltd, Dongfang Electric Corp., Shandong Electric Power Construction Corp. (Sepco) and Harbin Power Equipment Co. have been supplying equipment at a price point lower than Indian manufacturers as they are offered subsidies by the Chinese government. China is also able to supply the equipment faster than Indian manufacturers, as a result, private Indian companies prefer Chinese power equipment manufacturers.

IndiAs preferred power equipment suppliers to a majority of projects in India, Chinese manufacturers, have been the dominant suppliers in India over the past few years. India is soon expected to become the world’s largest buyer of power equipment spending around US$140 billion on power infrastructure in the five years to 2012, close to half of the projects are from the private sector. China won projects worth 36,800 MW in the last two years alone, equivalent to more than half the added capacity India is likely to achieve by 2012. India plans to spend $1.5 trillion on infrastructure from 2007-17 to overhaul the roads, railways and power plants in Asia’s third-largest economy. It plans to add 100,000 MW in the next five year plan from 2012-17.


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