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The China Gate

The China Gate

The former India Chairman of Boston Consulting Group is smiling, as are dom­estic power equipment manufacturers. Not only will imported power equipment on large projects be levied duties (hitherto none), but the domestic firms are likely to be authorised by the Government of India to initiate action against Chinese equipment entering the country in the highly sub­sidised form as it does. Arun Maira, now a Member of the Planning Commission, headed a panel to study how imported power equipment should fare in the dom­estic market, especially in bridging a differential faced by the domestic mega and ultra-mega projects. His panel proposed a 14 per cent duty on power equipment to be imported for mega and ultra-mega power projects-10 per cent customs duty and 4 per cent Special Additional Duty (SAD). This was subsequently changed to 5 per cent customs duty, 10 per cent countervailing duty and 4 per cent SAD. (Effective tax is expected to be 17-18 per cent.) More sense of victory for those supporting levy on Chinese power equipment follows because the equipment has led to some trouble with its functioning to Indian specifications.

On the other hand, if someone is frowning at Maira, it has to be the power ministry and the developers who have invested in the Chinese equipment on account of lower prices (sometimes up to 40 per cent lower than Indian equipment) and faster delivery. The power ministry sees Chinese equipment as a solution to target slippages that are now routine in generation.

The resultant price of some of the items could still be much cheaper than Indian-made equipment. If the duties are passed on to the buyer-a likely scenario-the tax department is the sole winner.

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