Row over customs duty waiver in India

July 14, 2006 at 10:18 AM
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NEW DELHI, July 14 (UPI) -- India's finance ministry Friday expressed reservation over the power ministry's plea for a custom duty waiver on liquefied natural gas.

The finance department has asked the power ministry why it has singled out LNG.

"If bringing down the cost of generating power is the purpose of the customs duty waiver then similar waiver should also be sought for coal," the finance ministry said.

This year 20 mt of coal will have to be imported for the power sector. Additionally, the government is working on the 4,000M ultra mega power projects, several of which would depend on imported coal, The Economic Times newspaper reported.

The power ministry has, however, argued that the basis of its current demand for a custom duty waiver for LNG and natural gas is due to the chance of an acute power shortage. Nearly 5,000 MW gas-based power capacity remains utilized in case of the need for gas.

The ministry said a custom duty waiver could make gas supplies from the spot market a proposition that could be seriously considered. The power ministry said this in turn would help address the power shortage situation. Currently, the cost of LNG in the spot market is over $10 per MBTU.

It has been estimated that the waiver in customs duty would effect reduction in fuel cost for power generation. The finance ministry has contradicted the power ministry saying its argument is not realistic. Questions have been raised on the efficacy of the government for getting $46 million in revenue, when gas supplies at affordable prices are not available to begin with.

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