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Reliance Infra, Tata pocketed tax gains worth Rs 434 crore
February, 27th 2014

Misrepresentation of taxes by major power companies meant Mumbaikars had to cough up an extra Rs 434 crore in three years, the Aam Aadmi Party claimed on Wednesday.

Releasing another dossier on what they called corrupt practices in the power sector, they alleged that Reliance Infra accrued benefits from the state but did not pass them on to the consumer, and flagged a conflict of interest as the state energy secretary is also chairman of Mahagenco, the holding company for the state power transmission, distribution and generation arms.

"Power companies pay tax at the rate of 18% but claim the full 33% as part of their remuneration which is paid for by the consumer," said the AAP's Satish Jain, pointing at Rinfra and Tata Power and accusing the power regulator of letting them off easily.

Both firms denied the claims, pointing out that MERC had moved the Appellate Tribunal of Electricity, but it had ruled in their favour.

AAP said the Maharashtra Electricity Regulatory Commission should have taken the tax mismatch issue to the Supreme Court. "If MERC does not file a case against the companies in the SC, we will," said Jain, adding that AAP's Prashant Bhushan was ready to fight the case in the SC.

Tata Power rebutted the AAP claim that 15% more tax was raised by the power companies from consumers by explaining its case as it had in the tribunal while RInfra said this attitude towards the tribunal ruling reflected their (AAP's) disregard for the judicial process (see box).

In a fresh onslaught against Reliance, AAP raked up the case of the Vidarbha Power Industries Ltd (VPIL), a 100% subsidiary of Reliance Power, which, it claimed, was given 300 acres of heavily subsidized land to provide power for developing industries in Vidarbha. "On completion in 2012, VPIL contended there was no demand for power in Vidarbha and signed a deal with RInfra's distribution unit in Mumbai. This is how resources are snatched for public good and diverted to purely commercial purposes," said the party.

It added that VPIL borrowed $150 million without hedging the loan. Losses due to a sharp depreciation of the rupee were passed on to consumers.

"In drought-prone Vidarbha, where farmers are committing suicide, VPIL consumed an enormous amount of water and did not deliver on the purpose for which it was set up. Should all the country's public resources be at the disposal of Reliance?" asked Anjali Damania, the Maharashtra convener of AAP.

"No concessions for land, water or any other facility has been given by the Maharashtra government to VIPL as falsely alleged by AAP," said an RInfra spokesperson.

AAP has received a legal notice from Reliance over its earlier allegations implicating the company. Jain, involved in collecting the dossier's data, dismissed it, saying they are not interested in replying to a private company that does not feel the need to provide an explanation for its actions.

AAP's allegation of a conflict of interest as Ajoy Mehta is both state power secretary and chairman of Mahagenco and that he has been accused of cartelization by the SC were strongly dismissed by Mehta. "As the energy secretary, I have nothing to do with tariff determination. It is fixed through a judicial process, which is the MERC," he said, denying that the SC had passed strictures against him.

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