New Delhi: The Union cabinet on Thursday relaxed some stringent conditions for availing fiscal benefits to those building power plants of at least 1,000MW capacity.
A policy to rapidly add power generation capacity in India allows a tax holiday for 10 years and waiver from paying customs duty on equipment imports to these big projects.
In the fourth revision of the policy, the cabinet has dropped conditions that stipulated privatizing power distribution networks and selling electricity to more than one state, for the projects to qualify for such benefits.
The policy has been revised to make investments more attractive and make it easier for the government to achieve a proposed target of creating power generation capacity of 78,757MW at a cost of Rs10.31 trillion by 2012.
“The decision of the Union cabinet reflects pragmatic thinking necessary to provide the much needed policy thrust for the growth of the power sector in India,” said Gokul Chaudhri, partner at consultancy firm BMR Advisors.
Currently, for a thermal power project to be awarded the status of a mega power project, it has to have a generation capacity of at least 1,000MW, sell power generated from the project to more than one state and be located in a state that has begun privatizing power distribution in cities with a population of at least one million.
In the case of hydropower projects, the threshold capacity is 500MW.
In Jammu and Kashmir and the North-East, the threshold capacities are 700MW for thermal projects and 350MW for hydropower.
Developers have been lobbying to get the criterion on inter-state sale of power removed, claiming that it is economically unviable for smaller projects.
This was reported by Mint on 13 November 2007.
Moreover, the 15% price preference available to the domestic bidders will not apply to tariff-based and competitively bid projects of public-sector units such as NTPC Ltd, the government said in a statement.
The cabinet also approved levying 2.5% customs duty on expansion of existing mega power projects.
In a separate development, the cabinet committee on infrastructure approved widening of two highway stretches to four lanes—in Himachal Pradesh and Uttar Pradesh—that would cost some Rs1,595 crore.
The projects will use a model in which a private developer finances and builds the road and derives revenue through tolls for a specific period of time.
The cabinet committee on economic affairs also decided to continue its scheme of setting up new food testing laboratories as well as upgrading existing ones with an allocation of Rs250 crore till 2012.