Under the import duty rationalisation announced in the Budget proposals, power generation projects will now attract a nominal basic customs duty of five per cent, as against the earlier 22 per cent.

However, an additional customs duty in the form of a 16 per cent countervailing duty (CVD) has been imposed on power generation projects. The CVD earlier was nil. This makes the total duty on power generation projects at 21 per cent as against the earlier 22 per cent.

Industry experts feel that this will not result in any substantial benefits to the power generation projects. Mega projects will continue to enjoy the special status of `previlaged projects' over otherprivate sector generation projects.

The infrastructure status given to the transmission and distribution sector will now bring these activities at par with the generation projects. This move has been welcomed by almost every section of the power industry.Under the provisions of section 80-1A, a five year tax holiday and a deduction of 25 per cent of profits in the subsequent five years is allowed to an undertaking engaged in the business of generation. In order to augment the transmission and distribution (T&D) of power, the Budget has proposed to extend similar benefits for undertakings setting up new transmission lines on or after April, 1, 1999.

This will further help in bringing down the electricity tariffs and will come as a major relief to the SEBs, who are unbundling their activities into separate generation, transmission and distribution companies.

However, at the same time, the finance minister has increased the customs duty on power transmission projects above 65 KV. As against the earlierbasic customs duty of 22 per cent on transmission projects, there will now be a duty of 25 per cent.

Moreover, the CVD has been increased from 10 per cent to 16 per cent resulting in a increase in an net effective duty of 41 per cent on transmission projects as against the earlier 32 per cent.

Mega power projects will continue to enjoy the zero import duty benefits which will definitely give them an edge over other generation projects. Despite the simplification in the import duty structure for other generation projects in the current Budget, their is still a big difference in the import duties for mega and other generation projects. Speaking to The Financial Express from London, Roger Woods of National Grid Company, UK said that the infrastructure benefits given to transmission projects will result in increased investments by the private sector.