"Cabinet has approved levying 21 per cent import duty on power equipment sourced from overseas," sources said.
The Cabinet has approved 5 per cent basic customs duty, 12 per cent counter-veiling duty and 4 per cent special additional duty on import of power gear.
Earlier this month, the Power Ministry had floated a proposal seeking higher duty on import of equipment for the power sector.
The Power Ministry had proposed 5 per cent basic custom duty, 10 per cent counter-veiling duty and 4 per cent special additional duty. Besides, with the recent hike in excise duty of 2 per cent, the overall import duty would be 21 per cent.
At present, equipment imported for projects of less than 1,000 MW capacity attract 5 per cent customs duty, while those above that enjoy exemption.
The proposal is aimed at providing a level-playing field to domestic manufacturers such as BHEL and Larsen & Toubro against cheap imports, especially from China.
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However, private power generation companies expressed dissatisfaction.
"It will increase the cost of power. The government has only gone by the protection of domestic equipment makers. They have not really addressed the concerns of private power generation companies," Association of Power Producers (APP) Director General Ashok Khurana said.
Late last month, the Prime Minister's Office had directed the Power Ministry to prepare a fresh Cabinet note on the issue. MORE