October 07, 2008

Captive power producers too may get mega project sops

It is reported that, keen to increase its power generation capacities, union ministry of power is willing to go that extra mile to encourage captive and merchant power plants. The proposal would ensure zero customs duty on import of capital equipment for the projects, deemed export benefits, and an income tax holiday regime as per Section 80IA of the IT Act.

The ministry informed the parliamentary standing committee on energy that it is considering a proposal to extend the fiscal incentives of the mega power policy to captive and merchant power plants both private sector enterprises. While the standing committee has supported the ministry’s proposal, it would like a similar tax holiday for the state sector as well. But for the time being, it is only the captive and merchant power plants that are on the agenda.

In its observations, the standing committee noted that "It strongly recommend that the government should finalize the mega power policy at the earliest and benefits from the same should not be confined only to the captive power generators but be extended to the projects in the state sector in order to increase and encourage participation of states in the power generation."

Mr Anil Razdan union power secretary told the standing committee that "Wherever private enterprise can step up in, I personally feel that it is more welcome than public enterprise getting in and moving into other areas."

In the past, the ministry of power had sought to extend the tax benefits of the mega power policy to all power projects, a stand that found support in the Planning Commission’s Integrated Energy Policy. However, the finance ministry has always been lukewarm to this proposal. However, it would seem that the union power ministry has not considered extending the same benefit to the state sector power projects.

At present, captive power plants account for an installed capacity of 22,335 MW.