New I-T move on TDS to make power dearer

Written by Sanjay Jog | Mumbai | Updated: Jun 28 2009, 03:43am hrs
The income tax department has demanded that tax be deducted at source (TDS) on transmission charges and fees paid by generators, consumers, power traders and distribution companies to regional load despatch centres (RLDC) and state load despatch centres (SLDC), for short-term transactions. TDS recovery is a pass-through on consumers and would lead to a hike in the cost of power.

Power ministry sources on Wednesday told FE, The I-T departments move needs to be reconsidered. TDS is required to be deducted by thousands of users, in millions of transactions. Many small generators/consumers will now hesitate in participating in the emerging power market because of additional work and accounting requirements.

Industry sources said that before the implementation of Electricity Act, 2003, the transmission and control of power flows was done entirely by government agencies. However, after the Electricity Act came into effect, any generator or consumer can use electrical highways for transmitting electricity by paying charges to government-owned entities.

These charges are fixed by electricity regulatory commissions. The accounting of electricity flows and charges is done by the national load despatch centre (NLDC), RLDCs and SLDCs. Also, the number of transactions runs into several hundred per day and they can be as small as 1 mw or 1 hour. The number of users could also run into several thousands. Transmission charges are received by two central government entities and two state government ones.

Sources also added that the parties involved are unbundled state electricity boards, which are state-run utilities and are regulated by state electricity regulatory commissions. Further, for short-term transactions, payments are routed through multiple agencies, which make it difficult to implement of such TDS provisions for such government-owned agencies.