Govt Proposes Tariff, Non-Tariff Barriers to Restrict Imports in Power Sector

The government is proposing tariff and non-tariff barriers to restrict imports in the power sector, to reduce large scale presence of overseas equipment

The government is proposing various tariff and non-tariff barriers to restrict imports in the sensitive and strategically important power sector where there is a large scale presence of overseas equipment, particularly from countries such as China. Government sources in the know said that the Ministry of Power (MoP) has proposed a set of changes in the regulations for import of power equipment that is likely to be accepted and implemented by the government after further deliberations by the Commerce and Finance Ministries.

Among the proposals, the MoP has suggested stringent quality standards for imports of all kinds of power equipment will be fixed and sub-standard products would be rejected outright with the supplier being blacklisted. Goods so imported shall be tested in Indian laboratories for adhering to Indian standards and checks would also detect the presence of malware that has the potential to jeopardise the security of critical infrastructure installations of the country.

In the power sector, there is also a plan to put another layer of checks at the ministry level that will first clear all import proposals. So, equipment /items required to be imported from prior reference countries will be done only after obtaining prior approval of the Ministries of Power and of New and Renewable Energy.

Moreover, the practice of issuing concessional custom certificates for certain import items in the renewable sector will be discontinued from a date that will be specified separately. This is likely to spur importers to look within the country for equipment, a move that will help governments objective of Aatma Nirbhar Bharat.

As previously reported by us, the public sector financiers Power Finance Corporation (PFC), Rural Electrification Corporation and the Indian Renewable Energy Development Agency (IREDA) have also been asked to structure their financing in such a manner that lower rates of interest are charged on the developers who will use domestically manufactured equipment. In addition, it has suggested re-imposition of basic customs duty (BCD) at the rate of 20 percent on imports solar cells and modules from August 1 when the period of existing 15 percent safeguard duty ends. The move is expected to check imports of solar gear from China that supplies about 80 percent of solar cells and modules to India.

Further restrictions are proposed by following an approved list of equipment models and manufacturers. In respect of renewable energy, this list will be made effective from October 1, 2020. This will ensure that all solar power projects which are bid out as per the standard bidding guidelines will be required to procure solar cells and solar modules and other equipment from manufacturers figuring in the approved list.

While the government has earlier put some restrictions on investment from neighbouring countries including China, the added dimension of confrontation between the armies of the two countries have fast-tracked the proposals to bring in more restriction of imports where sufficient domestic capabilities are existing. Though in the power sector, imports happen from a large number of countries, China is one of the biggest suppliers of both large and small equipment. Its presence in the Indian renewable energy space is even greater.