The power ministry has sought for ultra-mega power projects the extension of benefits available under Section 80-IA of the Income Tax Act till March 31, 2012.
The matter is being considered by the finance ministry, a senior official told Business Standard.
Under the provisions of Section 80-IA of the Income Tax Act, a five-year tax holiday and a deduction of 25 per cent (30 per cent in the case of companies) in the subsequent five years is allowed to an undertaking engaged in generation and distribution of power or to an industrial undertaking set up in backward states or districts.
The Union Budget for 2006-07 had extended this benefit up till March 31, 2010.
If implemented, the move will benefit developers of ultra-mega power projects. Each of these 4,000 Mw projects will require an investment of Rs 20,000 crore, with the gestation period of the investments estimated in the range of 10-15 years.
The other proposals before the finance ministry include revisiting and adequately enhancing the sectoral and group cap on debt financing as notified by the Reserve Bank of India, enhancing the debt component in the debt equity ratio of 70:30, and according mega power status to these projects even without central plan devolution in payment security.
It is also likely that the bond market is activated to arrange funds for the projects. They will be set up in Tamil Nadu, at Ib Valley (Orissa), Krishnapatnam (Andhra Pradesh), Akalatara (Chhattisgarh), Tadri (Karnataka), Sasan (Madhya Pradesh), Mundra (Gujarat), and Girye (Maharashtra).