The government has proposed to extend the excise waiver and income-tax holiday benefit to power projects based on supercritical technology, including large-sized energy-efficient power equipment. The proposal is part of the new mega power policy being worked out. The existing policy has no provision for giving incentives to the new-generation supercritical power projects.

In addition, the new policy would also allow projects that have completed financial closure but have not tied up requisite long-term power purchase agreements (PPAs) to apply for mega power status and avail incentives.

The changes would be included in the final draft of the new mega power policy finalised by the government, an official in the power ministry said. A committee of secretaries (CoS) cleared the new mega power policy early this month. The power ministry would include the changes in the draft policy before putting it before the Cabinet for approval, the official said, requesting anonymity.

Under the proposed changes, supercritical power projects would be included in the list of projects to be covered under the mega power benefits. The benefits would be extended only if such projects (supercritical projects) source equipment by inviting international competitive bidding with the mandatory condition that the supplier sets up an indigenous manufacturing facility.

The existing mega power policy allows duty-free import of capital goods and extends deemed export benefit (excise duty waiver) for supplies by domestic bidders. In addition, the income-tax holiday regime under Section 80-IA can also be availed. The incentive is given to hydel power projects of 500 mw and above and thermal projects of 1,000 mw and above.

The changes in the policy have been proposed to encourage technological innovation and technology transfer for developing indigenous capacity for manufacturing of supercritical equipment, another official of power ministry said, who also did not wish to be identified.

In addition, the power projects that have completed financial closure would also be able to get mega power incentives even though they are yet to tie up the requisite 85% of power sale under long-term power purchase agreements (PPA) with distribution utilities and trading companies.