The government of India on July 19, 2012 decided to slap 21% duty on imports of power equipment, mainly to protect domestic companies from cheap Chinese shipments.

"Cabinet has approved levying 21% import duty on power equipment sourced from overseas," sources said.

The Cabinet has approved 5% basic customs duty, 12% counter-veiling duty and 4% special additional duty on import of power gear.

Earlier this month, the Power Ministry had floated a proposal seeking higher duty on import of equipment for the power sector.

The Power Ministry had proposed 5% basic custom duty, 10% counter-veiling duty and 4% special additional duty. Besides, with the recent hike in excise duty of 2%, the overall import duty would be 21%.

At present, equipment imported for projects of less than 1,000 MW capacity attract 5% customs duty, while those above that enjoy exemption.

The proposal is aimed at providing a level-playing field to domestic manufacturers such as BHEL and Larsen & Toubro against cheap imports, especially from China.

However, private power generation companies expressed dissatisfaction.

"It will increase the cost of power. The government has only gone by the protection of domestic equipment makers. They have not really addressed the concerns of private power generation companies," Association of Power Producers (APP) Director General Ashok Khurana said.

Late last month, the Prime Minister's Office had directed the Power Ministry to prepare a fresh Cabinet note on the issue.