Private power producers have said that any hike in customs duty on import of power equipment, mainly from China, would lead to increase in electricity tariffs and would be a major impediment to inclusive growth.
In a letter to Power Secretary, Association of Power Producers Director General Ashok Khurana has written that fuel availability and pricing concerns, financing difficulties and poor health of distribution utilities have led to an increase in cost of power generation in many cases.
"Any step at this stage which would additionally increase the cost of power generation and delay the capacity addition would be very detrimental to the sector and the economy as a whole," he wrote.
Association of Power Producers (APP), is a body representing private power companies in the countries. It asked the government to keep the decision on custom duty on imported power equipment in abeyance so that the power sector does not get exposed to further vitiating factors.
"Import of equipment for power projects has been a major contributor in the capacity addition in the 11th plan with almost 50% of the coal based capacities based on imported equipment," it said.
The Prime Minister's Office has asked the Power ministry to float a new Cabinet note on increasing duty on import of cheap equipment, mainly from China, and to provide a level-playing field to domestic manufacturers.
Equipment imported for projects of less than 1,000 MW capacity attract 5% customs duty, while those above that are exempt.