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Higher import duty on power equipment to send negative signals

Industry body ASSOCHAM said that any move to hike import duty on power equipment will send negative signals to the country's trade partners. The chamber also said the move would affect investment climate in the key sectors.

The chamber said that "The government's proposal to hike tariff on imports of some Chinese goods or impose a complete ban on specific items like power and telecom equipment will send negative signals to India's trade partners.”

The indigenous power equipment makers have been demanding a levy of 14 per cent on imported equipment mainly from China in order to provide them a cushion against local taxes.

The move for import duty is being opposed by the private sector power producers.

Giving some comfort to BHEL and L&T, the government has broadly agreed to a level-playing field for the domestic power equipment manufacturers against imports at zero or low duty.

Assocham said Indian companies can gain substantially by accessing Chinese capital goods at attractive prices by way of imports.

The chamber said India and China can emerge as the world's largest trading partners by 2030, with their bilateral trade set to rise from USD 63 billion now to USD 100 billion in the next four years.

At present, 5% duty is levied on equipment imported for projects less than 1,000 MW capacity power projects. No levy is charged on imports for projects above 1,000 MW capacity.

Indian exports to China jumped 68.8% to USD 19.6 billion in 2010-11 from USD 11.6 billion in the previous year. The imports also increased by 41% to USD 43.5 billion from USD 30.8 billion during the same period.

The industry chamber said that in order to bridge the widening trade gap, Indian companies must scale up operations and widen their product portfolio to increase exports of finished and value-added products.

Indian exports to China mainly comprise of metals, ores, iron and steel besides cotton, while imports include electrical machinery, equipment, boilers, chemicals, fertilisers and iron and steel.