The Union power ministry proposes to give customs duty and deemed export benefits to projects using supercritical technology. The latter benefit will be given only to projects that buy equipment

The ministry also wants to allow duty-free import of capital equipment to set up factories that will produce supercritical boilers and turbine-generators. The objective is to help build indigenous technology and capacity to make such equipment.

As a result of this, the government may have to forgo Rs 6,500 crore in revenue. This is based on an assumed import of 20 units in the next five years, a government official said. Another Rs 100 crore will be sacrificed because of duty exemption.

The move will safeguard Bharat Heavy Electricals (Bhel) and joint ventures like those between Larsen & Toubro and Mitsubishi, Bharat Forge and Alstom; JSW & Toshiba, and GB Engineering and Ansaldo.

“Support of this kind is necessary for the growth of the Indian supercritical equipment market. The government should facilitate the manufacture of at least the first 10 or 15 supercritical sets,” Bhel chairman and managing director K Ravi Kumar told Financial Chronicle.

L&T Power managing director and chief executive officer Ravi Uppal said the proposal would give domestic players a level playing field to compete with foreign players. “For building capacities, power equipment companies need to be governed and nurtured initially.”

Zero customs duty and deemed export benefits will immediately give an advantage to state-owned power producers NTPC and Damodar Valley Corporation. The cabinet committee on infrastructure headed by prime minister Manmohan Singh last Thursday approved bulk tenders to source supercritical equipment for 11 units of the two power companies.

Reliance Power has announced a joint venture with Shanghai Electric to produce power equipment in India. It is not yet known if the company will place orders for equipment for its ultra mega power projects in Andhra Pradesh and Jharkhand with the joint venture or import it.

“Indian power equipment makers are worried about large orders going to Chinese and Korean companies. Recently, they voiced their concerns at a meeting with power minister Sushilkumar Shinde,” the government official said.

To encourage technological innovation and transfer of knowhow, it has been proposed that mega power benefits be extended to supercritical projects. The mega power policy allows zero customs duty, deemed export benefits and tax holidays to only coal-based projects of over 1,000 mw capacity and hydropower plants above 750 mw.

Central Electricity Authority data indicate that of 43 supercritical units purchased by Indian utilities so far, orders for only four have been placed with Indian companies. Orders for 26 boiler- turbine- and- generation sets have been placed with Chinese companies; eight have gone to Koreans, and the rest to Russian and Italian manufacturers.