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Report | July 2012

Power equipment

IEEMA takes a look at the issue which has been debated for years.

The government, as per news reports at the time of going to press, may impose import duty of up to 21 per cent on power equipment for large projects. The Indian Electrical and Electronics Manufacturers' Association (IEEMA) in response to the government's decision on import of generation (BTG) equipment for mega power projects (MPPs)/UMPPs (1,000 MW and above) has issued the following response and opinion: IEEMA has called for immediate imposition of import duty on power equipment for mega and ultra-mega power projects over 1,000 MW. Ramesh Chandak, President, IEEMA, said, "This issue of providing a level-playing field for domestic manufacturers of electrical equipment vis-à-vis imported equipment has been debated and discussed for long at the highest levels of the government and action must now be taken immediately. There is equally a strong case for even increasing import duty on transmission and distribution (T&D) and generation equipment for non-mega projects."

According to IEEMA

• The entire industry is in the doldrums because of the sluggish growth in the power sector and the escalating imports of electrical equipment and is in danger of becoming commercially unviable.
• The industry is 10.56 per cent of the manufacturing sector is terms of value and 1.5 per cent of the GDP. It also provides direct and indirect employment to 1.5 million people and over 5 million across the entire value chain.
• The equipment industry Rs 110,000 crore in 2010-11, comprises of - generation equipment which constitute 24 per cent of industry, and T&D and allied equipment which constitute the other 76 per cent.
• T&D equipment manufacturers are working at only 65 per cent of their production capacity. In the last few years, the domestic manufacturing capacity of generation equipment has been ramped up and currently stands at 20,000 MW per annum against a requirement of about 16-17,000 per annum. With 6-7 joint ventures coming up in India, the capacity will increase to 40,000 MW per annum by 2014-15. The power generation capacity addition target for the 12th Plan may also be scaled down to about 75,000 MW. As a result, even generation equipment sector will soon be sitting on huge surplus capacity.
• During the last five years, India's imports of electrical equipment imports have increased at a CAGR of 28.28 per cent and were at $11 billion in 2010-11. Import duties on most products are quite low and are being further lowered under the various FTAs signed by India.
• Disproportionate reliance on imported power equipment, with uncertain quality and lifecycle, and with no domestic manufacturing facility to provide immediate spares, replacements, etc, especially for heavy equipment, is fraught with long-term risks.
• There is uncertainty in the power generation sector due to unavailability of fuel/lack of coal linkages for new projects, land acquisition issues, delays in environmental and other clearances, etc., which is impacting the downstream T&D sector. All this is directly impacting the domestic electrical equipment industry as demand is not picking up.
• Assured availability of quality power at competitive rate is a sine qua non for industrial and economic development of India. For an efficient and developed power sector in a country of India's size, a strong domestic electrical equipment manufacturing base is essential and also strategic.
• T&D equipment is not covered.
• It is only for import of generation (BTG) equipment for mega power projects (MPPs)/UMPPs (1,000 MW and above), where the current customs duty is nil.
• Import duty already exists on T&D equipment and also BTG equipment for non-MPPs/UMPPS. It ranges from 5 to 10 per cent basic customs duty, CVD 12 per cent and SAD 4 per cent, coming to a total duty ranging from 22.85 to 28.85 per cent.

Vishal Gakhar, Director General, IEEMA, said, "The uncertainty in the power generation sector due to unavailability of fuel and lack of coal linkages for new projects, land acquisition issues, delays in environmental and other clearances are already impacting the downstream T&D sector. In the last 5 years, India's imports of electrical equipment imports have increased at a CAGR of 28.28 per cent and were at $11 billion in 2010-11. With T&D and allied equipment constituting 76 per cent of equipment industry and operating at only 65 per cent of their current production capacity, there is a clear need to provide a level-playing field for T&D equipment as well."
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