Power sector’s wish list from the 2014-15 Union Budget is to bring energetic stimuli into the value chain through a serious overhaul of policies, regulations and tax structures. While accelerated pace of distribution reforms and long-term policy on fuels — conventional (both domestic and imported) and non-conventional are critical, there are a number of indirect and direct taxes that the sector needs to push it forward.

The sector needs to be exempt from service and excise tax in analogy with port, railways, airport, road, etc., since these taxes are not applicable on supply of power and services of transmissions and distribution of electricity. Further, including the power sector in the proposed GST regime and including the transmission sector in Section 8(3)(b) of the CST Act would help in bringing down tariffs and thus avoid the cascading impact of increased electricity tariffs on the economy. Transmission — an integral part of the power business — needs to be allowed additional depreciation (Section 32(1)(iia)) as is available to generation and distribution activity. Most importantly, the power sector should be kept outside the purview of MAT to enable it to truly receive benefit of the tax exemptions under 80IA and sustain itself. In addition, to avoid unnecessary litigation, there is need for clarifying/inserting the definition of “initial assessment year” in section 80IA.

There is need for encouraging and incentivising energy efficiency and environmental- friendly technology. And since carbon credits are gained by the latter, there is need for exempting income from sale of carbon credits from levy of income tax. Companies spend significantly on developing “Greenbelt” and this should also be eligible for 100 per cent deduction. The Government could also consider allowing expenditure on CSR activities as a deductible expense.

Inclusion of electricity payments as statutory dues in section 43 B would incentivise commercial customers for timely payment of electricity charges, thus helping in recovery of dues.

Restructuring financial packages for ailing and deserving operating units and increasing tenor of loan to avoid liquidity issues would help attract future investors into the sector. The sector also needs to increase banks’ sectoral limits (15% to 25%) while also encouraging external commercial borrowings (ECBs) by hedging mechanism to manage forex exposure; and relaxing RBI guidelines on usage of ECB funds.

The writer is MD, Tata Power

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