Lower cap for power projects rejected

A decision on this is awaiting approval of the Cabinet Committee on Economic Affairs.

The finance ministry has shot down a power ministry proposal that sought to lower the qualifying capacity for power projects to be set up in Jammu and Kashmir, Sikkim and the seven north-eastern states.

The proposal meant to accord even 700-Mw projects the status of mega power projects, allowing them to tap the various benefits available under this category. A mega power project has to otherwise have 1,000-Mw generation capacity.

The finance ministry has said any equipment imported before a project was notified as a mega power project would be liable to the duty that was applicable to non-mega power projects.

The power ministry had proposed that for thermal power projects located in these states, the qualifying criteria be reduced from 1,000 Mw to 700 mega watt.

It had asked for lowering the criterion for hydel power generation plants, too, from 500 Mw to 350 Mw. The decision is currently awaiting approval of the Cabinet Committee on Economic Affairs.

Under the mega power project category, a project may avail of zero Customs duty, tax holiday and an ease of administrative controls like those related to environmental clearances.

"The power ministry has a shelf of about 78 viable hydel projects, even when the tariff is below Rs 2.50 a unit. Therefore, the finance ministry feels there is no case for subsidising costs by reducing the qualifying threshold," sources said.

The finance ministry feels that the proposed amendment is of little significance to hydel power projects.

"There seems to be only one thermal power plant, located in Tripura, available under the proposed policy. The Central Electricity Authority had said the present proposal would reduce the tariff for this specific project by 8-9 paise. However, this is not particularly relevant to the viability of the project as it will be based on gas," the official said.