State defers move to waive 5.4% ST to DPC

Sanjay Jog

Mumbai, May 16: THE Maharashtra government has deferred a decision to waive 5.4 per cent sales tax on the procurement of naphtha by the Dabhol Power Company (DPC) from the state-run Indian Oil Corporation in view of internal bickering among the constituents of the Democratic Front (DF).

Simultaneously, the state finance department, especially its sales tax wing, has been opposing the waiver to the DPC. The finance department and power department have yet to arrive at a consensus on this front. The DF allies, especially Left parties — Peasants and Workers Party, Janata Dal (s), Republican Party of India (Athavale), Samajwadi Party, CPI, CPM — have been against offering any sops to the DPC when they have been pressing for the cancellation of Dabhol project.

Mantralaya sources told The Financial Express that the state government was weighing the possibility to waive sales tax in a bid to give a much needed relief for the loss-making Maharashtra State Electricity Board (MSEB).
As per the power purchase agreement (PPA), the DPC is entitled to pass through the burden on MSEB, which ultimately would forward it on to its consumers.

Sources said that the DPC has been making repeated pleas to the state government for sales tax waiver on the grounds that it had not paid any local sales tax during the procurement of naphtha from Glencore during 1999 and 2000. However, it has pointed out that the DPC would have to pass through the burden of Rs 2.5 crore in the wake of sales tax payment to the MSEB for the recent procurement of naphtha from IOC. MSEB would have to bear an additional burden of Rs 71.5 crore during the calender year 2001 on account of pass through. DPC has been procuring naphtha at Rs 12,000 per ton comprising 21.8 per cent of customs duty, 5.4 per cent of sales tax and $18.80 of premium.

State finance and sales tax departments have been citing at sops which has already been granted for power utilities using naphtha way back in 1995. The previous Shiv Sena-BJP alliance government had slashed the sales tax on naphtha from 15 per cent 15 per cent to 4 per cent so that the utilities can procurement within the state and not from outside. However, in the changed situation, a section of the state government is of the view that the naphtha purchase would shift to Gujarat from Maharashtra if sales tax waiver is not granted to the DPC. State chief minister Vilasrao Deshmukh admitted that the finance department was seized of the matter and said his government has not yet taken any decision about waiver of sales tax to the DPC.

No fresh appointments on the Godbole panel
The state government has ruled out the possibility of fresh appointments of negotiators on the Madhav Godbole renegotiation committee in the wake of inability of its three members to attend its proceedings. “If the committee chairman asks for replacement then the government will give a thought to it,” Mr Deshmukh said and added that the decision by RK Pachauri, Kirit Parikh and EAS Sarma to skip the proceedings would not affect the working of the panel.

The task before the committee was only to renegotiate and bring down the power tariff, he said. “Reducing the power tariff which has reached at an astronomical heights is the core issue before the committee,” Mr Deshmukh said and added “our desire is that something positive should emerge from discussions between the renegotiating panel and Enron.