Firms tagged the proposal as 'retrograde' and 'anti-competition.
In a letter to the Finance Minister P Chidambaram, the Association of Power Producers (APP) expressed opposition to the proposed mandatory domestic equipment sourcing, arguing it favors only a few players and will add to firms' cost burden.
"We believe that in order to kick start the order book of Indian equipment manufacturers, an enabling environment needs to be created, but any action to impose mandatory domestic equipment sourcing is impractical and not in the interest of the country's power consumers," Ashok Khurana, Director General of APP said.
Private developers explain that export credit agency financing usually backed international equipment manufacturers, enabling Indian developers to take advantage of cost effective financiing.
"Indian banks have almost breached their sectoral limits for lending to the power sector because of fuel issues and in this background there would be serious challenges in financing UMPPs without foreign financing," he said.
Khurana added that the proposal will make it hard for developers to achieve financial closure.
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