Currently, incentives under mega power policy are confined to stand-alone power projects.
The finance ministry has rejected a proposal to give tax incentives to captive and merchant power plants.
Currently, fiscal sops and tax incentives under mega power policy are confined to stand-alone power projects. The power ministry wants to modify the policy to make captive and merchant plants eligible for mega power plant status.
Fiscal concessions, besides distorting the tax structure, act as hidden subsidies and are unfair to other sectors, which do not enjoy similar treatment, said the revenue department, responding to a draft Cabinet note prepared by the power ministry to modify the Mega Power Policy.
The policy offers incentives such as complete waiver from Customs duty on equipment imports and a 10-year tax holiday to thermal power projects with a minimum capacity of 1,000 Mw and hydel projects of 500 Mw capacity.
Under the modified mega power policy, incentives are proposed to be given only if developers of a power project (captive, merchant or others) undertake either tariff-based competitive bidding for the entire power to be produced or go in for international competitive bidding for procuring equipment.
However, the new policy proposes to abolish the condition of mandatory inter-state sale of power to avail of tax incentives. It has also sought to do away with the provision that requires power purchasing states to agree in-principle to privatise distribution in all cities with a population of over one million.
The Department of Revenue was of the view that sectoral development should be supported through budgetary allocation or Plan support to achieve quantifiable results in a time-bound manner. The Department of Revenue does not support the proposals enumerated in the draft Cabinet note, it added.