Power firms want sops for small projects too

A key demand of the private power companies is extension of incentives that are given to the ultra mega plants to mid- and-small plants as well.

"All power generating units should be given same benefits and tax exemptions as are being given to ultra mega power projects," says Harry Dhaul of the Independent Power Producers' Association of India (IPPAI). This would not only encourage private investors but also bring in foreign investors, he added.

The power companies also want the government to re-introduce Section 23G, under which financial institutions which used to lend funds to power and other infrastructure sectors were getting tax exemptions.

"Restoration of 23G should be looked into. It is crucial for sectors like power," says Ravi Jhunjhunwala, CMD of LNJ Bhilwara. The Section was revoked on April 1 last year.

Dhaul, who is also in favour of additional incentives to financial institutions, agrees. "At present there is no incentive for banks to finance infrastructure projects. This needs to change," he adds.

The power producers also want Minimum Alternate Tax (MAT) to go. "The government should reduce or completely abolish the present 10 per cent MAT rate, which was reintroduced two years ago," says JL Patel, vice-president, finance, Essar Power.

Earlier, power projects were exempted from income tax for 10 years but two years ago, MAT was reimposed. The MAT rate at present is 10 per cent plus surcharge. "I think the government should give some concession on the MAT rate," says Patel.

On Customs duty, the producers wants concessions on capital equipment extended to 500 Mw projects. This sop is now available to projects that are bigger than 1,000 Mw.

There is also a demand for a change in the definition of the threshold limit in both thermal and hydel power projects so that power projects of less than 500 Mw in thermal and less than 250 mw in hydel can also enjoy the same concessions as larger projects, says Jhunjhunwala.

Power producers are also asking for extension of tax exemption on profits made (the 5-year extension of an existing 10-year tax exemption on profits to power companies will expire in 2010).

Tax on fuel (diesel) for power sector is another issue which needs attention, they say. Though the base cost of this fuel is very low, it becomes expensive due to various taxes like excise duty and cess. Expensive fuel results in higher tariff rates, which have to be borne by consumers. "Some rebate should therefore be given to the fuel used in the sector," says Dhaul.

The producers are also demanding lower rates of dividend tax and withholding tax to encourage foreign investors.

The government should bring in a scheme on the lines of the Textile Upgradation Funds Scheme for the sector, suggests Jhunjhunwala.

BUDGET WISHLIST

Extension of ultra mega power project incentives to smaller projects

Restoration of Section 23G incentives for lending to private sector

Concession in MAT rate

Customs duty reduction on small capacity projects

Rebate on fuel tax