New Delhi: With a view to encourage power generation and reduce transmission and distribution losses finance minister Pranab Mukherjee on Monday extended the tax holiday for the power sector by one more year till 31 March, 2012.
The extension of tax break is part of the government’s efforts to scale up the country’s power generation capacity to meet growing needs.
Unveiling the Budget for 2011-12, Mukherjee said tax holiday for power sector would be extended till 31 March 2012.
The power sector is entitled to tax exemption, under section 80-IA of the Income Tax Act, which ends this fiscal.
The tax exemption would benefit projects that are expected to take off in the remaining time of the 11th Five Year Plan (2007-12), including Ultra Mega Power Projects.
During this Plan period, the capacity addition was envisaged at 78,700 MW and was later revised to 62,374 MW. Capacity addition of 32,032 MW was achieved till 31 December, 2010.
Projects that start power generation, distribution, transmission or that undertake substantial renovation and modernisation of existing network are eligible for exemption.
Further, the government is planning to provide excise duty exemption for domestic companies that supply capital goods for mega and ultra mega power projects.
Capital goods imported for existing mega or Ultra Mega Power Projects (UMPPs) are given concessional excise duty. These goods are entitled for a concessional basic customs duty of 2.5% as well as exempted from Counter Vailing Duty.
Mukherjee noted the exemption creates a disability for the domestic suppliers who are required to pay central excise duty on supplies to mega and such projects.
“I propose to correct this anomaly by providing a parallel excise duty exemption,” he added.
To boost the use of green technologies, customs duty on solar lanterns would be reduced to 5% from existing 10%.
Further, Mukherjee noted that basic customs duty on a “few more inputs used in the manufacture of solar modules/ cells is being reduced to nil”.
Meanwhile, the government proposes to invest Rs 57,640.84 crore in 2011-12 in public sector power entities, that includes NTPC and NHPC. The allocation is much higher than this fiscal’s amount of Rs 50,947.42 crore.