E-Paper
Easier tax, bond rules for power sector
India is Asia's third-largest economy but continues to be crippled with huge power shortages ranging from 12 to 16 percent of peak demand. Anupama Airy reports.
India is Asia's third-largest economy but continues to be crippled with huge power shortages ranging from 12 to 16 percent of peak demand.
Realising that the only way to go is through capacity addition, the government proposes to announce measures in the budget for 2009-10 to boost the availability of funds for this.
These could include increasing the exposure limits of banks to fund the sector and allowing tax-free bonds by financiers like the Power Finance Corporation and Rural Electrification Corporation.
PFC and REC may also be allowed to raise funds of $ 1 billion each per year under the “automatic route.”
The sector needs as much as Rs 10 lakh crore to meet capacity addition requirements of 78,000 megawatts (MW) in the 11th Plan that ends in 2012.
With the award of four ultra mega power projects (UMPPs) of at least 4,000 MW each, as much as Rs 64,000 crore is needed for these four UMPPs.
REC’s Chairman and Managing Director P Umashankar said his firm planned to raise Rs 23,000 to 25,000 crore this year. “This will be done through a combination of different instruments like infrastructure bonds, tax-saving certificates and external commercial borrowings (ECBs). Banks and financial institutions will also be approached,” he said.
The Budget is also expected to extend income tax incentives for power projects to help meet the Power Ministry’s target to add 14,507 MW in 2009-10.
The director-general of the Independent Power Producers Association of India, Harry Dhaul, said tax incentives should be extended to captive power plants.
Duty -free imports of transmission equipment required for new projects may also be announced.
