Chinese Equipment and Import Duties

The government is considering a proposal to increase import duty on power generation equipment to 19% from current 5% applicable to less than 1000 MW while negligible duty is applicable to 1000 + MW. This is to provide a level playing field for domestic manufacturers against the Chinese manufacturers who provide equipment very cheap.

However, we think that the government should not interfere more than required and focus on the ultimate goal of reliable, quality and affordable power to all. It should be left to the power project developers to their discretion on sourcing of equipment. While dealing for the PSU, the government took the stand that equipment should be manufactured in India, due to while various foreign players, including Chinese set shop in India. So, now should these also get the benefit which is clearly intended for the state player BHEL?

Additionally, the developers who buy Chinese equipment also get cheap debt for the same. Would the Government instruct Indian Banks to provide cheap debt for usage of Indian equipment? (As a separate matter, Indian banks have become quite averse on providing loans to power sector.)

The Generation end of power value chain is well developed with huge private participation. The government should focus on the distribution end - especially on collection and efficiencies of Distribution Companies.