 "Import of duty-free capital goods for power sector banned")
The EPCG scheme allows zero-duty import of capital goods on the condition that goods produced be exported worth six times of the duty saved under the scheme in six years.
"Authorisation under the EPCG scheme shall not be issued for import of any capital goods for generation/transmission of power (including captive plants and power generator sets of any kind)," the Directorate General of Foreign Trade said in an order.
The impact of the DGFT notification is minimal on domestic producers because they do not export much to comply with the obligation under the EPCG scheme. Besides, in an earlier notification two years ago, the government had clarified that power supply to special economic zones and export oriented units would not qualify as exports to comply with the outbound shipment obligation under the EPCG scheme.
A senior executive at BHEL said the order would not have a major impact on the company as power equipment does not fall under its purview. BHEL is the largest manufacturer and EPC contractor for the power sector.
Ajay Sahai, director-general and CEO of FIEO, said the notification was in line with the objective of plugging misuse of the scheme as power generators or suppliers were not really exporters.
"The scheme should be applicable for power generators as well and the power supply to SEZs and EOUs should be allowed to meet the export obligation condition. This would ensure smooth power supply to manufacturing units in these export zones, considering that they pass on the capital goods duty benefit in the form of lower tariff," Sahai added.
However, small capital goods producers hailed the move. "The decision will have a positive impact on the indigenous power equipment industry. In the past few years, the domestic power equipment capacity was underutilised as cheap imports flooded the market and orders shrank," said Babu Babel, president, Indian Electrical & Electronics Manufacturers' Association (IEEMA).
"This order would not only provide us the much-needed level playing field but encourage 'Make in India'. We would like to also convey that the Indian power equipment industry is prepared to meet the demand," Babel added.
IEEMA is the representative association for the whole value chain in power generation, transmission and distribution equipment manufacturers.
The government has set a target of 88,537 MW capacity addition for the 12th Plan period ending 2016-17. Till December, 72,240.12 MW, or 81.59 per cent of the target, has been achieved, according to the Central Electricity Authority.
In the Foreign Trade Policy 2015-20 the government reduced the export obligation for those procuring capital goods domestically to 4.5 times of imports as against 6 times under the EPCG scheme, which will encourage the domestic capital goods industry.