IEEMA demands import duty on power equipments

Disturbed by the sluggish growth of the power sector in India and the escalating imports of electrical equipment by power utilities in the country, the Indian Electrical and Electronics Manufacturers' Association (IEEMA) has demanded an immediate imposition of import duty on power equipment for mega and ultra-mega power projects over 1,000 MW.

"The 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, said Ramesh Chandak, president of IEEMA, adding that there was an equally strong case for increasing import duty on transmission and distribution (T&D) equipment and generation equipment for non-mega projects.

According to IEEMA, the entire industry is in 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 has a share of 10.56 per cent of the manufacturing sector in 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 five million across the entire value chain.

The Indian electrical equipment industry, which was worth Rs 1.10 lakh crore in 2010-11, comprises two segments - generation equipment (constituting 24 per cent of the industry) and T&D and allied equipment (constituting the remaining 76 per cent). According to IEEMA, T&D equipment manufacturers have been working at just 65 per cent of their production capacity. In the last few years, the domestic manufacturing capacity of generation equipment had been ramped up and currently stands at 20,000 MW per annum against a requirement of about 16-17,000 per annum. "With 6 to 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 the generation equipment sector will soon be sitting on huge surplus capacity," said Chandak.

IEEMA has also expressed some serious concerns over disproportionate reliance on imported power equipment. "With uncertain quality and life cycle, and with no domestic manufacturing facility to provide immediate spares, replacements, especially for heavy equipment, is fraught with long term risks," an IEEMA release noted. 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 USD 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.

Emphasising that a strong domestic electrical equipment manufacturing base was essential and strategic for an efficient and developed power sector in a country of India's size, IEEMA has further noted that 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. Imports duty already exist on T&D equipment and BTG equipment for non-MPPs/UMPPS. It ranges from five per cent to 10 per cent basic customs duty, CVD 12 per cent and SAD four per cent, coming to a total duty ranging from 22.85 per cent to 28.85 per cent, the release added.