Bulk of the domestic consumers may have to pay a higher tariff on power due combined effect of one percentage point rise in central excise and a possible inclusion of transmission and distribution (T&D) in service tax net.

According sources in West Bengal Government controlled utility, transmission cost of power may move up by 6 paise a unit. The average impact of rise in CST on lower grade coal is estimated to be 1 paise a unit.

Project cost reduction

The Association of Power Producers (APP), representing private players, say that refinancing of rupee loans by ECB coupled with reduction in withholding tax on ECB from 20 per cent to 3 per cent (for three years) to reduce the cost of borrowing for power projects from nearly 13-14 per cent to half (inclusive of hedging cost).

Also, the decision to prevent cascading impact of dividend distribution tax will help companies implementing projects through special purpose vehicles.

Cheaper imported coal

Users of imported coal like Adani Power are major gainers of the exemption of import duty and reduction in counter-veiling duty to 1 per cent. Similar exemptions were granted to LNG-based power producers.

The final incidence of duty cut is estimated to be a little over 9 percentage point bringing home savings of approximately Rs. 480 a tonne to users of Indonesian coal. The impact will be higher for African coal. India imported nearly 84 million tonne of coal in 2011.

Sources in Adani group confirmed savings of 20-25 paise per kilo-watt hour on coal import duty reduction. Slated to commission nearly 3300 mw of capacity in 2012-13, the group will also benefit from I-T holiday extension by another year.

Confusion prevails

A senior NTPC official was confused of the final impact. “We are not very sure how the Service Tax and Excise Duty increase will affect our input costs. The details have to be examined to see the ramifications in totality,” he said.

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