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Power Honchos Seek Duty Cut on Coal, Equipment

  • Ahead of the Union bud-get, private power producers on Wednesday made a strong case for customs duty exemption on imported coal and removal of both customs and excise duties on mining equipment imports.At a meeting with prime minister’s principal secretary Pulok Chatterjee, private power sector honchos, including Anil Ambani of Reliance Power and Cyrus Mistry of Tata Power, demanded that the power sector be exempted from service tax by including it in the negative list.They also wanted setting up of an expert committee to revisit the power contracts affected by various issues and evolve pra­c­tical ways to handle the same.
  • At present, the government levies five per cent customs duty on coal import.In case-II bidding for power plants, coal is obtained from captive mines and, thus, mining becomes a part of setting up and running a project. Therefore, power producers want duty exemption on import of mining equipment.
  • “We have told the government that variable costs (of fuel) for a power plant is beyond control. At least don’t increase the fixed (equipment) cost,” said Ashok Khurana, director general of Association of Power Producers (APP), who attended the meeting. The power producers strongly opposed the move to impose 19 per cent import duty on power equipment as recommended by a committee headed by Arun Meira. Indian power producers import equipment from China, Korea, the US and Germany. “We pointed out that after the Arun Meira committee recommendations, rupee has depreciated. Now, if the government imposes 19 per cent duty, the impact cost would be double. At the same time, order book of domestic companies such as Bhel and L&T are full for the next few years. So there is no point in imposing duty on power equipment,” Khurana said.
  • Others who attended the more-than-an-hour-long meeting included Jindal Steel and Power’s Naveen Jindal, Hinduja Group’s Ashok Hinduja and GMR Group’s GM Rao. The meeting was a follow-up of their parleys last month with prime minister Manmohan Singh.The issues disrupting growth of the power sector include change in law in the countries from where coal is imported, a drop in supplies from state-run Coal India, denial of environmental clearance to captive mines, distribution losses and shortage in gas supply.Chatterjee viewed the demands as “genuine and practical” and gave an assurance to address them immediately, said Ashok Khurana, director general of the Association of Power Producers (APP). According to a presentation made by APP, there would be about 17 per cent gap between demand and supply of domestic coal. So a ‘price pooling’ mechanism may be put in place for bulk import of the commodity by Coal India, it said.
  • Also, changes in regulatory regimes in Indonesia and Australia have made imported coal expensive, which has increased the cost of power production by Re 0.70-Re 1 for every kwh. The power producers want policy changes at home to neutralise the rise in the cost of production. The association said at present the power sector gets less than 75 per cent of its total natural gas requirement. Therefore, in case of all new gas finds during the 12th plan, the first priority should be given to the power sector followed by the fertiliser industry.Power producers want the centre to immediately allocate 22 mmscmd of natural gas for the 6,500 mw capacities that have been cleared by the power ministry. Also, an assurance should be given for the remaining projects that would be completed in 2012-13.
  • The companies also want exemption of state levies for hydropower projects. They pointed out that non-availability of logistics and infrastructure in Arunachal Pradesh has hampered setting up of hydel units.“A developer may be allowed to construct allied infrastructure on a cost recovery basis. Arunachal Pradesh has nearly 50,000 mw of hydro-power potential. However less than 1 per cent has been exploited till date due to inadequate logistics and remoteness of project locations,” they told Chatterjee.With regard to the cash-strapped power distribution sector, the delegation wanted standard bidding documents for privatisation of distribution utilities and allowing of customer migration between utilities across the country.The private power producers also asked for revised standard bidding documents for new projects. “It has been nearly five years since the initial standard bidding documents were rolled out (SBDs) for case I and II bidding. Separate SBDs need to be prepared for gas-based projects on capacity charge basis, with full fuel pass through, to enable utilities to fulfil their peak-load requirements,” they demanded.

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