Shooting down a proposal to levy 20 per cent duty on imported power equipment, the finance ministry said yesterday that domestic capacity was far short of demand and the proposed move would make electricity more costly.
The Economic Times newspaper said a note circulated by the power ministry seeking higher duties that would have raised costs of building power plants had been turned down by the finance ministry. The ET report quoted an unnamed government official privy to the deliberations.
Meanwhile, local equipment suppliers, including BHEL, are struggling to cope with the demand from power firms that are putting up new capacity of around 80,000 MW in the Eleventh Plan that would end 2012.
The official added that any change in the duty structure should be carried out only after two years with the commencement of the 12th pla
According to government officials, BHEL would cater to the demand of around 55 per cent while the rest would be imports mostly from China which would account for 20 per cent of the Indian demand.
They add that domestic capacity is likely to catch up with demand only by 2013-14, but demand would rise further with the government expecting another 100,000 MW capacity to be added in the next five-year plan.