US urges India to refrain from raising duty on power gear imports

CONCERNED over the Union government's proposed duty hike on power equipment imports, the US has urged India to refrain from raising the duty on import of such equipment, official sources said.

In a communiqué to the Prime Minister, Dr Manmohan Singh, the US Trade Representative, Mr Ron Kirk, expressed apprehension that the 21 per cent duty hike, meant to safeguard domestic equipment firms like L&T and BHEL from 'cheap and low quality' Chinese imports and to create a level playing field, would also end up hurting American equipment majors like General Electric.

Mr Kirk believes that the duty hike would end up making power gear imports more costly and, in turn, result in higher electricity costs for consumers.

The Association of Power Producers (APP) had notified the Power Ministry that raising the Customs duty on equipment imports would further increase electricity tariffs and lead to delays in capacity addition. It also pointed out that about half of the coal-based capacities were dependent on power equipment imports.

While highlighting the fact that financial problems, fuel availability concerns and the sorry state of distribution utilities had already led to higher generation costs, the APP contended that any hike in import duties at this juncture would adversely affect not only the sector, but also the economy.

While the Prime Minister's Office had directed the Power Ministry to apprise the Cabinet on the proposed duty hike, the Ministries of Commerce, Finance, Heavy Industries and Power are at present holding discussions on the issue, the sources said.

With a 5 per cent Customs duty on equipment imports for below 1,000 MW projects already in place, sources expressed fears that the proposal to hike duties would end up hitting ultra-mega power projects enjoying exemption at present.

Experts feel that Mr Kirk's communiqué assumes significance in the backdrop of the recent differences between India and the US on a host of trade and investment issues.

Source : Exim News Service - NEW DELHI, July 16