Power ministry seeks duty waiver on generation equipment
The power ministry has written to the ministry of finance seeking waiver of customs duty on import of capital equipment for all power generation projects -- irrespective of their source of funding -- for a period of three years.
The ministry has also sought a similar exemption for power transmission project imports. At present, exemption from customs duty on import of capital equipment is available for generation projects, funded by multilaterals such as World Bank and Asian Development Bank (ADB), and also for mega power projects.
Generation projects funded through domestic resources have to pay customs duty even if they are set up on the basis of international competitive bidding.
And power transmission projects are required to pay a higher effective customs duty of 50.8 per cent whereas generation project carry an effective duty of only 21.8 per cent for import of equipment.
The power ministry has been seeking finance ministry intervention with regard to rationalisation of duty for power projects, but there has been no response from the latter so far.
Transmission projects are an extension of generation projects and unless transmission is strengthened, evacuation of power from new projects would continue to be a problem, officials said.
Major work on improving the transmission system is on the cards, with the proposed linking of the five regional grids into a national grid.
The ministry of power is working out the funding plan for executing the project and government has set ambitious targets for participation in the project by the private sector.
The relaxation of duty norms is expected to lower costs for private players undertaking transmission projects through the Independent Power Transmission Company (IPTC) route and also lower for state-owned PowerGrid Corporation Ltd (PGCIL).
Private participation through joint venture has now been ruled out in the light of lukewarm response from private players, and further augmentation of the transmission capabilities is expected to be carried out by private players through the IPTC route and by PGCIL.
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