GMR, JSPL, Sterlite to benefit from mega power policy relief

The mega power status will help these companies claim tax benefits

Power generators such as GMR, Essar Power, Jindal Steel and Power and Sterlite Energy are likely to benefit from the relaxations in mega power policy announced on Thursday.

A number of coal-fired power projects have been under stress due to non-availability of fuel and reduction in off-take and lack of payments. “The move will help a lot of coal-based power projects,” said Umesh Agarwal, associate director of PricewaterhouseCoopers.

The mega power status allows projects to claim tax benefits that would net 10 per cent savings on carriage charge of tariffs. The power policy, which was amended in 2009, covers coal-based power projects of 1,000 Mw and hydro power projects of 500 Mw, above to claim tax benefits. They can import equipment duty free but to avail benefits they had to supply around 75 per cent power that they produced through competitive bidding. However, projects based in states like Chhattisgarh, Jharkhand, Madhya Pradesh and Odisha could not avail this due to host state obligations.

Some states mandate these power projects to sell 35 per cent of the power produced to the state-owned utilities at regulated tariffs. “The power producers will have to supply 30 per cent power at  regulated rates and seven per cent at variable costs,” explained Debasish Mishra, senior director at Deloitte Touche Tohmatsu.

The latest relaxation allows 65 per cent of power to be sold under competitive bidding. “This dispensation would be one-time and limited to 15 projects which are located in the states having mandatory host state power tie-up policy of power purchase agreements (PPAs) under regulated tariff,” said a press release by the government.  

“This is more of a move to align it to suit state regulations,” said Agarwal. Added to that, the Cabinet Committee on Economic Affairs (CCEA) also extended the the maximum time period to 60 months instead of 36 months from the date of import for provisional mega projects, for furnishing final mega certificates to tax authorities. This time extension will benefit 25 power projects, which would have a net capacity of around 30,000 Mw.

The mega power policy was introduced in 1995 but benefits under it were available to only those generators who had either put up their power plants or had got a provisional certificate by placing orders before July 2012. No new projects will stand to benefit with the latest relaxation. “It will only benefit those projects which have received a provisional certificate already,” said Agarwal.