Power ministry may move Cabinet for Customs sop

The power ministry proposes to move the Union Cabinet for Customs duty exemption on transmission systems associated with mega power generation projects if the finance ministry does not approve of this long-pending demand.

The power ministry is also mulling a separate proposal for the Cabinet to grant excise duty and service tax exemption on goods required for setting up such power projects.

Sources said both demands had been pending for some time and ministry officials were keen that these be incorporated in the forthcoming Budget.

While mega power projects are exempt from Customs duty, the transmission system (for evacuating the electricity generated) for such projects is not. In Budget 2006, a 4 per cent special additional duty was imposed on import of general items.

State-owned Powergrid Corporation of India Ltd will be a major beneficiary of this move because it has a transmission monopoly in the country.

Ministry mandarins are also awaiting the decision of a group of ministers on various tax incentives on liquefied natural gas, including granting of sales tax concession by giving it declared goods status.

Accordingly, this issue will not be taken up as part of the annual budgetary exercise. The power ministry is also proposing that Section 54 EC of the IT Act be amended to include Power Finance Corporation so that its bonds are also included in the definition of long-term specified assets.

This will provide a level playing field to the Power Finance Corporation vis-à-vis the Rural Electrification Corporation, which already enjoys this facility. Both companies finance power projects in rural areas.

Another important amendment being sought is doing away the double taxation of income earned by companies like National Hydroelectric Power Corporation and Tata Power.

The Finance Act, 2003, made domestic companies liable to pay dividend distribution tax, currently at 14.025 per cent, including a surcharge and education cess.