Larsen & Toubro India has cancelled plans to expand power equipment manufacturing capacity

Engineering major Larsen & Toubro has decided to shelve the plans to expand its existing power equipment manufacturing capacity of 5,000 MW per annum in the wake of the government's refusal to impose duty on imported equipment, especially from China.



"Out of the question… We are even apprehensive of utilising the current capacity, would want to increase the capacity once the policy on chinese equipment import is clear," Larsen & Toubro Chairman A M Naik said



It is believed finance ministry has objected to the imposition of import duty on power equipment sourced from overseas, even though domestic manufacturers had made several representations for a level-playing field with Chinese equipment firms.



Power equipment-makers like state-run BHEL and L&T had asked for imposition of import duty on power equipment sourced from abroad.



According to sources, domestic players have lost several contracts for sourcing power equipment within the country to Chinese companies, which have an advantage due to the zero duty structure on imports.



Under the Mega Power Policy, imports of power equipment for thermal projects with a capacity of 1,000 Mw and above and hydel plants of more than 500 Mw are exempted from excise and customs duty.



Earlier, the Ministry of Power had proposed imposing a 10 per cent import duty on power equipment, besides a 5 per cent countervailing duty and a 4 per cent special additional duty.



Domestic equipment makers like BHEL and L&T are said to have favoured the imposition of duty on imported power equipment to create a level-playing field for homegrown companies in the backdrop of cheaper imports from other countries.



However, independent power producers(IPP) like Reliance Power and Tata Power have opposed the duty.



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