The power ministry has sought customs duty and service tax exemption for construction equipment of hydropower projects that are languishing due to problems like lack of forest clearances, local agitation and land acquisition problem.
If accepted, the move would benefit companies like NHPC, NTPC, GMR and Jaiprakash Associates that are implementing hydroelectric projects. "Setting up a hydroelectric project is very difficult. Hence we have felt the need to incentivise the developers. The power ministry is of the view that the companies should be given fiscal incentives of exempting the equipment for hydropower projects from import duty and service tax," a senior power ministry official said.
The plants attract basic customs duty of 5%, countervailing duty of 12%, and special additional duty of 4% among others. The duties work out to 23.08% of the value of the imported goods while indigenous capital goods attract excise duty of 12.36%, the official said. The ministry may approach the finance ministry for extending the benefits to companies that are executing hydropower plants.
Hydro plants contribute about 20% of the country's electricity generation capacity. About 95 hydropower projects with a total generation capacity of 40,000 mw are awaiting clearances at various levels of central and state governments. The hydropower potential of Arunachal Pradesh alone has been estimated to be around 50,000 mw of which only 405 mw has been harnessed so far. Major bottlenecks affecting implementation of hydropower projects, especially in Arunachal Pradesh, is lack of adequate infrastructure like connecting roads and bridges for transportation of construction material and machinery to projects sites. The government has constituted an empowered group of ministers (EGoM) to review and expedite implementation of such infrastructure projects in the northeastern states.
The official said the power ministry would ask the EGoM to constitute an inter-ministerial committee to expedite implementation of roads critical for development of hydropower plants. Measures to expedite regulatory clearances are also likely to be discussed and proposed to the EGoM.
The government plans to add fresh power generating capacity of 88,537 mw in the next five years - comprising of 10,897 mw through hydropower plants. In the current fiscal, 132-mw hydropower generation capacity has been added till June against a target of 1,198 mw.
Source- Economic Times