DPC project may get tax sops, mega status

The empowered group of ministers on the Dabhol power project will meet to consider according a "mega power plant" status to the facility and granting it tax benefits available for infrastructure companies under the proposed liquefied natural gas policy.

Officials told Business Standard the facility would not be given specific benefits as demanded by its new owners but the sops available under various policies would be made available to the project.

The government is keen on ensuring that the request for benefits, once approved by the EGoM headed by Defence Minister Pranab Mukherjee, is sent to the Cabinet Committee on Economic Affairs to help in the early start of the project. "The benefits will ensure that cost of power is kept around Rs 2.30 a unit," said an official.

In a note to the EGoM, the Indian lenders to the project had also sought that the Centre waive excise duty on naphtha in case the project used the fuel for the initial three-six months after the restart of the 714 Mw first phase to make it economically viable.

In addition to waiving all Customs duty for capital goods, they had also sought a refund of Rs 324 crore (Rs 3.24 billion) import duty paid on equipment, some of which are in the possession of the revenue department. A mega power plant status will entitle Ratnagiri Gas and Power Pvt Ltd to import equipment duty-free.

To avail of the status, the company will have to ink power purchase agreements with more than one state. At present, only the Maharashtra government has agreed to purchase power from the company.

A mega power plant status is accorded to projects that have a generation capacity of over 1,000 Mw. Once the second phase is completed, the project will have an installed capacity of 2,184 Mw.

A tax holiday of 10 years under Section 80 IA of the Income Tax Act is also proposed for the new owners of the project.

Under the proposed LNG policy, inter-state sales of liquefied natural gas will be exempted from sales tax, and Customs duty is proposed to be reduced from 5 per cent to zero duty.