Tax sops likely for captive power

Duty reduction to boost generation in remote areas

The government is considering a proposal to reduce the customs duty on capital goods imported for setting up captive power plants. It has been proposed that the duty be slashed from the current 20 per cent to 5 per cent to bring it on a par with other power plants.

Mega power plants "" inter-state plants with a generating capacity of 1,000 megawatts (mw) in case of thermal plants and 500 mw for hydel projects "" are exempted from customs duty on equipment imports.

In its Budget proposals sent to the finance ministry, the power ministry has also proposed a that the additional customs duty be halved to 8 per cent.

At present, captive power plants, whose capacities exceed 5 mw, attract a basic customs duty of 20 per cent along with an additional customs duty of 16 per cent. The latter is, however, "cenvatable", which means a plant can claim credit for the duty paid.

The industry ministry feels a reduction in the duty on the import of equipment used in captive power plants will encourage industrial clusters in backward and hilly areas like the North-East. "It will be part of our Budget proposals," an official said.

An even-handed policy for the entire sector is also being supported by the Planning Commission, which says the entire sector should get similar treatment.

The revenue implications have not yet been worked out even by the power ministry, which feels that a boost to the sector will also help in improve the power supply situation.

Captive plants are allowed to supply surplus power to the grid, subject to regulatory control as per the provisions of the Electricity Act, 2003.

The Act also exempts such plants from the requirement of approval or clearance from any authority.

The captive segment is estimated to have a capacity of around 20,000 MW.

The Act also ensures non-discriminatory open access for sending electricity generated from a captive plant to the destination of its own use, subject to availability of transmission capacity.

For such open access, the captive plant has also been exempted from payment of any surcharge. The plants can also establish and maintain dedicated transmission lines.