Power sector pitches for extension of tax holiday

Bussinessline Bureau

New Delhi, Feb. 19

With Budget 2010-11 to be presented next week, the power sector is pitching for an extension of the tax holiday available now. Tax breaks under Section 80-IA of the Income-Tax Act will end on March 31, 2011, making any power project that commences operations after that date ineligible for the sop.

The holiday allows a developer to claim tax exemption of up to 10 years within the first 15 years of a project's commissioning. The original deadline was March 31, 2010, which was subsequently extended to March 2011 by the Finance Act, 2009. Industry players are seeking another extension.

Capacity additions

Industry chamber FICCI has, in its pre-Budget memorandum, petitioned the Government that in the light of the slow pace of capacity additions during the preceding Five-Year Plans and the need to meet the growing demand for power, tax holiday benefits for the generation and distribution sectors should be extended by at least five years.

The CII has made a strong pitch against the provision for free electricity to certain economic groups, as is being done in several States. It has also called for strengthening the APDRP programme structure and formulating milestones with State Electricity Boards.

Industry players have also demanded that the Government link Central assistance to States to reduction in T&D losses achieved by them. Power shortage issue should be addressed by framing and implementing regulations and through the creation of wholesale power market.

Excise duty waiver

Transmission firms such as Power Grid Corporation of India Ltd have also sought that the excise duty exemptions that are available now to power developers for mega projects, should be made available for transmission companies too.

Also, excise duty exemptions in power equipment should be reconsidered to attract investments.

India has a power generation capacity of around 1,57,000 MW and plans to add 78,577MW by 2012.

According to the Power Ministry, the Government expects to face a Rs 4.51 lakh crore funding shortfall.

Of the Eleventh Plan capacity targets, the Centre now expects only around 62,000 MW to be commissioned, with the balance expected in the Twelfth Plan.

The Centre is also planning a capacity addition target of around 1,00,000 MW in the Twelfth Plan.