Industry & Economy
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Power
Tax breaks to result in lower power tariffs
Our Bureau
New Delhi
,
Feb. 3
CONSUMERS drawing power from new power generation projects will enjoy lower tariffs on the back of tax breaks proposed by the Government. The tax breaks under the Income-Tax Act, which expire in 2006, are proposed to be extended to 2012 in today's Interim Budget announcement.
The tax breaks allow for a tariff reduction of around 8-10 paise per unit.
The Government intends to enhance to the scope of the tax breaks to cover assets taken over from State electricity boards. This will significantly aid the reform process since it will help reduce the `tariff shock' when a distribution area is privatised. The tax breaks provided are under Section 10(23)G and Section 80(1)A of the Income-Tax Act.
Under Section 10(23)G, the net interest and dividend income is exempt from income tax. Under Section 80(1)A, the profit on investment made during any blocks of 10 years in the first 15 years is exempt from income tax.
The Government has also announced its intention to examine the possibility of making the countervailing duty on power sector equipments `cenvatable'. If implemented, the consumer tariff will drop, as the excise levy on the final product, electricity, will be lesser to the extent of duties paid on products used in its manufacture such as turbines and so on.
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