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Mumbai: Power sector, which is quite worried over the achievement of the capacity addition target of 78,700 mw by end of 11th Plan, is a disappointed lot over the Budget proposals. Except increased allocation for the Accelerated Power Development and Reform Programme (APDRP) and reduction in customs duty on wind power equipments, the Budget has not made provision for enforcement of tax and MAT applicability exemption of 10 years, irrespective of the year of commencement of power generation and distribution. Besides, there was no incentive for the Centre’s plan for the development of more and more ultra mega power projects (UMPPs).
The industry had sought amendment in rule 6 of CENVAT credit rules and merge 91AQ to address anomaly in treatment of input credit to equipment suppliers of UMPPs. All projects of at least 500 mw or more, which were expecting mega project benefits, have to wait further. Ironically, the industry was expecting accordance of infrastructure status for power in a bid to broaden the beneficiaries of 80 IA benefit beyond developers to equipment suppliers, O&M operators.
Independent Power Producers of India (IPPAI) director general Harry Dhaul said, “Basically, the sunset clause has been extended for a much shorter period than desirable, since the gestation period for the power projects is much longer. It would take another 10 years so that investors across the world who are looking at investment in the Indian power sector could be suitably incentivised. There is an indirect benefit for the power sector by increasing APDRP allocations.”
Power ministry sources admitted that industry was expecting relaxation of sectoral caps and groups caps on financing to facilitate the financing of the projects. As reported by FE this demand was also made strongly by the former power secretary RV Shahi who had argued that all business groups are more attracted to the power sector but they are getting handicapped on account of two financing cappings namely sectoral and group. However, there is no mention in the Budget proposals.
Ernst & Young partner Kuljit Singh said, “MAT rate has been increased from 10% to 15% (even though the credit period for allowing carry forward of MAT has been increased from 7-years to 10-years); this will impact nearly all power projects as these are typically set up as SPVs and will reduce their profitability. Service tax has been imposed on transport of goods through rail--this will increase tariffs as the cost of...
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