Budget 2017: Power Ministry wants tax sops booster for ‘ongoing’ hydel projects

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New Delhi | Updated: January 19, 2017 11:09:24 AM

With an aim to generate more electricity from clean energy sources, chiefly the hydropower sector, Ministry of Power has sought concessions for under-construction hydel projects in the upcoming Union Budget for 2017-18.

With an aim to generate more electricity from clean energy sources, chiefly the hydropower sector, Ministry of Power has sought concessions for under-construction hydel projects in the upcoming Union Budget for 2017-18. (Representative image by Reuters)With an aim to generate more electricity from clean energy sources, chiefly the hydropower sector, Ministry of Power has sought concessions for under-construction hydel projects in the upcoming Union Budget for 2017-18. (Representative image by Reuters)

With an aim to generate more electricity from clean energy sources, chiefly the hydropower sector, Ministry of Power has sought concessions for under-construction hydel projects in the upcoming Union Budget for 2017-18. This includes the clubbing of these projects under the ‘renewable energy’ category, alongside solar and wind projects, which entitles these projects to sharply lower tax rates. A proposal for deemed export status has also been sought for hydro projects, in line with the proposed status for solar power units and a demand for a zero-rated supply status for the hydro sector, which is likely to involve a tax shortfall of Rs 880 crore over five years, according to The Indian Express report.

Recently Power Minister Piyush Goyal had said that there will be a major thrust on hydro sector by different ways to bring down cost of electricity from this renewable source. “I shall be going later this week to Arunachal Pradesh also to review some of the power projects. In coming few months, we want to give major thrust by different ways to bring down the cost of hydro power,” Goyal told reporters here. “Hydro power is also renewable energy. We are working on a position paper after studying all international experiences, we will look very seriously to see whether these should be categories as renewable power,” the minister said.

Notably, under the current tax regime, the renewable energy sector attracts zero excise duty, value added tax (VAT) at the rate of 0-5 per cent with concessional VAT by most states and a Central Sales Tax (CST) levy of 2 per cent. In the present scenario, the small hydro projects up to 25 MW are treated as renewable energy while others do not get incentives being provided by the government for encouraging clean energy. India has set an ambitious target of adding 175 GW of renewable energy capacity by 2022 which includes 100 GW of solar, 60 GW from wind, 10 GW from bio-power and 5 GW from small hydro-power (up to 25 MW capacity each).

The proposed sops for the hydro sector comes at a time when the Centre is making concerted efforts to push hydel generation as a counter-balance to the massive deployment of renewable capacity such as solar and wind. Since India does not have much fuel for gas-based power plants, there is now a policy push to the hydro sector as hydel generation capacity can ramp up and down to adjust to the vagaries of solar and wind generation every day.

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