Independent power producers have sought exemption from complying with global accounting norms from April, saying some provisions of the international financial reporting standards could come in the way of viable funding of their projects.

Association of Power Producers , a body representing private sector power firms such as Reliance Power , Tata Power, GMR , Essar and Adani, said some of the proposed changes concerning debt covenants, taxation and revenue sharing could make many projects unviable.

The feasibility of the power sector will be under considerable uncertainty if the financials of power companies have to account for financial leases, the association said in a representation to the ministry of corporate affairs.

Almost 90% of power supply in the country is based on power purchase agreements (PPA) covering most of the power plant life. Contrary to the existing standards where revenue is accounted and distributed in accordance with the PPA arrangements, the IFRS norms may see such arrangements as leases, a difference which could affect the companies ability to raise long-term capital.

Under the international financial reporting standards (IFRS), power-generating companies cannot treat power plants as assets in their balance sheets. Such assets will be treated as owned by their customers, reducing power generating companies to the status of operation and maintenance (O&M ) companies.

It could also be damaging from the taxation point of view.

Under the tax laws, benefits of exemptions such as tax holidays or investment-linked incentives may not be available to power generating companies on the grounds that they are no longer engaged in the business of generating power, the letter says.

The representation also brings to the fore the growing unease among some corporates on the convergence deadline, by calling for the deferment of IFRS rollout till April 2015 in case a sectoral exemption cannot be given.

Industry body FICCI had earlier sought a deferment of the deadline, raising concerns over lack of clarity on regulatory issues associated with the convergence.

The ministry should carry out a thorough review of the implications of adopting IFRS and make appropriate amendments / changes in other laws to ensure that the companies in the priority sector (power and energy) are not adversely affected, says the representation, copies of which have been forwarded to the prime ministers office and the ministries of finance and power.

Many of the concerns of the power sector are pretty valid, like the one related to debt covenants, taxation and revenue sharing with government, said Dolphy DSouza , partner at consulting firm Ernst & Young . He, however, said the right way to address the concerns is not through changes in IFRS but in taxation laws, banking regulations and the Electricity Act.

The government is, however, going ahead with the convergence plan. On Tuesday, corporate affairs minister Salman Khurshid reaffirmed the governments commitment to the deadline, which forms part of the prime ministers commitment at the G20 summit in 2009.

We have received the comments, and are in the process of issuing clarifications on all aspects relating to convergence, said a senior ministry official, when asked about the concerns raised by the industry.