The Union Cabinet is likely to take up the issue of imposition of customs duty, special additional duty (SAD) and countervailing duty on import of power equipment for mega power projects to protect the domestic industry.

The Power Ministry has circulated a draft Cabinet note in this regard with the backing of the Heavy Industries Ministry and domestic players such as BHEL, Bharat Forge, L&T, which are badly impacted by cheap import of power equipment from China. “The matter is now under the consideration of the Finance Ministry. The draft Cabinet note includes imposing 10 per cent customs duty, 4 per cent special additional duty and 5 per cent countervailing duty on import of power equipment,'' a senior Power Ministry official informed.

The proposal is part of the recommendations of the Maria Committee headed by Arun Maria, Member (Industry), Planning Commission.

Power Ministry officials said that in 1999 when duty on import was removed for mega power projects, 15 per cent price preference was given to domestic players to compensate them for the benefit given to imported equipment by reduction of duties. However, in December 2009, the policy was amended and the price preference was removed in the case of tariff-based bidding projects. As per the National Tariff Policy, all projects will be based on tariff-based bidding from January 2011onwards, implying that domestic suppliers will not be entitled to price preference in any project.

L&T and BHEL have argued that the continued import of cheap power plant machinery is hitting their profit margins and they have lost huge orders to Chinese companies as they have the advantage of a favourable administered exchange rate, low labour costs and large existing capacities to offer equipment at low rates.