Having lost significant market share to cheap Chinese imports, domestic power generation equipment makers have asked the government to either impose customs duty on imports or do away with local taxes to create a level playing field.
Sources in-the-know said the matter has been deferred in the Cabinet Committee on Economic Affairs (CCEA) twice.
According to estimates, Chinese power equipment-makers have secured orders for a whopping 40,000-MW worth of capacity. However, domestic companies claim that no attempt has been made to either develop local vendors or establish a local service office.
This could be a serious issue, as post-sale service is very important in view of the 25-30 year life cycle of power plants.
Domestic manufacturers have lamented that no customs duty is payable on imported power equipment for mega-power projects, whereas they have to pay multiple local taxes such as sales tax, entry tax/octroi, differential financing cost and cess, as well as for issues associated with local infrastructural deficiencies.
On the other hand, in China, due to restrictions on imports and import barriers to protect the domestic industry, an Indian competitor suffers a disadvantage of a whopping 35 per cent vis-à-vis domestic Chinese competitors on account of various factors such as Indian taxes on their inputs and high import duty in China.
Ironically, within India also, Indian manufacturers suffer a disadvantage on account of sales tax/value-added taxes and entry tax/octroi, which is applicable to supplies from domestic manufacturers and inputs only, but not in the case of overseas supplies due to high-sea sales.
In 1999, when the import duty was removed for mega power projects, 15 per cent price preference was given to domestic manufacturers to compensate for the benefit given to imported equipment. However, in an amendment to the mega power policy notified in December, 2009, the price preference for domestic manufacturers was removed in the case of tariff-based bidding projects.