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Balaji C. Mouli

NEW DELHI, June 14

THE Government is mulling waiver of customs duty for all power generation projects. Currently, the waiver is available only for mega thermal power projects having a capacity of over 1000 MW and hydel projects above 500 MW.

"We have received proposals from States such as Andhra Pradesh and Karnataka where medium and small capacity projects are coming up. In this backdrop, we will be taking a proposal to the Cabinet seeking customs duty waiver," a senior Power Ministry official told Business Line.

The States have said such a duty waiver will reduce the power procurement cost and aid in the turnaround of the state-run power sector. Currently, power generation projects attract a customs duty of around 22 per cent. This constitutes around 10 per cent of the power tariff since the import component is around 50 per cent of the project cost.

A waiver of duty will reduce the power tariff by around 8-10 paise per unit in case of generation projects. In the event a State purchases power from a 200 MW project (with imported equipment) for a year at 85 per cent capacity, it will end up saving around Rs 11 crore per annum on account of the customs duty waiver alone.

For the Tenth Plan period (2002-2007), the States are expected to add around 16,387 MW in fresh generating capacity, which is about 33 per cent of the total projected addition of 49,225 MW.

Of this, 6,604 MW capacity is under execution, 4,481 MW are in the approval stage while another 5,201 MW are either in the process of being awarded or where work is scheduled to commence. In the State sector, Andhra Pradesh and Karnataka are among the States with high capacity addition targets. Andhra Pradesh has estimated that it will add around 1,608 MW while Karnataka has planned to add 2,925 MW in fresh generating capacity during the Plan period.

In the Central sector, the capacity addition target has been set at 24,122 MW. Of this, 14,095 MW is under execution or has been completed while another 660 MW is in the process of being awarded and another 9,367 MW is in the approval stage.

In the private sector, which is likely to contribute around 8,717 MW during the Tenth Plan period, around 1,101 MW is under execution or has been completed while another 2,809 MW has been held up for legal or financing issues etc. The creation of yet another 1,601 MW is in the process of being awarded while 3,206 MW is in the approval stage.

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