MP industry protests power cess

Iindustries in Madhya Pradesh are planning to protest against the state government's decision of imposing cess at the rate of 20 paise per unit on power distribution.

The BJP-led state government has continued with the cess at the rate of 20 paise per unit. The cess on captive power had been introduced by the previous the Digvijay Singh government with effect from 29 June 2001.

Some local industrialists had moved to the Supreme Court against the government decision to impose cess on captive power generation. The Apex Court in 9 December 2003 directed the state government to withdraw cess on captive power generation.

The Court also directed the state government to refund the entire amount levied as cess on the captive power plants at state industrial units.

But the Bharatiya Janata Party government introduced Madhya Pradesh Upkar (Samshodan) Adhiniyam 2004 (on 27 February 2004) and thereby found an alternate route to impose cess on captive power generation.

The Act is effective from 15 April 2004.

The local production units would definitely lose business and competency. They would have to shell out more money as cess on captive power generation now.

Government must abolish the tax, said a member of Federation of Madhya Pradesh Chambers of Commerce of Industry.

So far none of the local chambers of commerce and industry has confirmed to register protest against the government decision but according to industry sources, Mandideep (Bhopal) based units had already filed cases against the state government decision to levy cess on captive power generation and they are planning to move Supreme Court against the government's recetn decision.

Sources have also said, "Business chambers like CII, PHDCCI, Pithampur Audyogik Sangathan may initiate a dialogue with the state government after general elections."

The interesting part of the new amended Act is that the industry's protest against the cess on captive power generation has boomeranged on them. "They will have to pay the cess on distribution with effect from 29 June 2001," said a top government official.

It means an industrial unit in the state with a captive power generation capacity of 1 MW will have to pay at least Rs 12,50,000 per year as cess.

"The cess has been imposed since it contributes Rs 200 crore to the state exchequer. Once the financial health of State Electricity Board improves, the state government may reconsider the decision."

While experts say, "Captive power generation has not only increased the diesel consumption but the revenue to the state has been increased since the government imposes entry tax and commercial tax on diesel. There is no logic on imposing cess on captive power generation when the state government is not in a position to provide quality power."

The industries are also indirectly saving a hefty amount for the government by generation captive power, they said. According to Federation of Madhya Pradesh Chambers of Commerce and Industry (FMPCCI) the state produces 700-750 MW of captive power.