The government has restricted duty-free import of goods required for setting up mega power projects to 111 specified projects (including seven Ultra Mega Power Projects), for which the certificate from the ministry of power was issued before July 19.
A similar dispensation has been given for duty-free import of goods required for expansion of two specified mega power projects UMPPs).
The exemption notification, 49/2012-Cus dated September 10, gives effect to the restrictions by amending S.No. 507 and 508 of the notification numbered 12/2012-Cus dated March 17.
Simultaneously, excise duty-free clearance of goods made in India for setting up or expanding mega power projects have also been restricted to certificates issued before July 19.
Notification 34/2012 that amends S.No. 337, 338 and 339 in the basic notification 12/2012 dated March 17, names 104 mega power projects on one list and seven UMPPs on a separate list.
Power equipment manufacturers have been complaining for some time about cheaper imports from China and asking for protection. Their view is that hidden subsidies in China that enable supply of goods at lower prices call for suitable policy action to level the field.
Power producers, however, have been lobbying for duty-free imports, which would lower their project costs and enable them to supply power at lower prices.
In their view, abruptly withdrawing the exemptions will hit the very basis on which they had agreed or planned to supply power at a certain price and won the bids.
Earlier this year, the government withdrew the deemed export benefits for supplies of goods for setting up of non-mega power projects but allowed import of goods required by manufacturers to make and supply goods to power generation plants, at five per cent basic Customs duty. Now, the government has gone a step further to assure the producers that their mega power projects will not be affected.
However, for setting up mega power projects, for which certificates will be issued after July 19, the imported goods will attract an aggregate duty of 22.85 per cent. S.No. 506 of the exemption notification 12/2012-Cus dated March 17 prescribes a basic Customs duty of five per cent for goods required for power generation projects, including gas turbine power projects (excluding captive power plants set up by projects engaged in activities other than in power generation). Such goods will attract the usual additional duties and cess upon imports.
The deemed export benefits for supplies to mega power projects approved before July 19 will continue to be available under Para 8.2 (f) (i) of the Foreign Trade Policy. That entry allows the deemed export benefits for supply of goods manufactured in India to any project or purpose in respect of which the ministry of finance — by notification 12/2012-Cus dated March 17 (earlier Notification No.21/2002-Custom dated March 1, 2002), as amended from time to time — permits import of such goods at zero Customs duty, subject to conditions specified in this notification.
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