released to the investor, the tax can be recovered at an agreed percentage, say 20%. If this is introduced the hassles of an individual investor of going and filing returns is reduced and he gets a tax free income where the company paying the interest pays the tax and GOI gets the entire amount at one time.
Vidyut Vikas Patras should be introduced. In next 10 years Rs. 900,000 crores need to be invested to achieve the target of 100,000 MW as per the Udesh Kohli Committee. Just like Indira Vikas Patras which helped to reduce the total deficit of GOI, if Vidyut Vikas Patras are introduced, it will bring in investment and hence improve the economy. The power companies should be allowed to invest in bonds u/s 80-IA, 54-EAC.
Just like power companies, the financial institutions that are financing power projects can also be given tax holiday u/s 80-IA. Ultimately it will help to reduce the cost of power and the financial institutions will also be able to give lower rate of interest. Similar benefits should also be extended to the lenders. In the hydropower sector in the initial years the tariff is high and it tapers down over a period of time. Such projects should get long term funding. PFC and Power Grid have made a dent in the market by providing an average period of 10-12 years, a fifteen year paper repayable from 7th year onwards and average period of maturity of 10 years is coming. For the first time PFC has done a transaction with a bullet of 15 years of about Rs. 200 crores. Another suggestion is that if the depreciation is less than the loan repayment due in the initial year, the tax provision can be modified so that the depreciation is higher. This will facilitate cash flows in the initial years of the project commissioning and reduce the tax liability which is a pass through cost.
For mega projects imports are allowed without duty payment. This customs duty exemption should be extended to all projects. Another experiment is to allow deferred duty on import by power companies. The same can be payable after the project successfully runs 5 years. This can reduce the funding requirement and interest cost in the initial period.
The import duty for gas based projects is 20%, while spares attract duty of 50-52%. For renovating old projects this unnecessarily increases the cost. Spares should be charged with lesser import duty than the project import. Full exemption from customs duty for next 10 years sales tax, excise tax, works contract abolition for specific projects, can be thought of. The loss of revenue can be made up by higher industrial output with lower tariffs. A back end levy after 10 years can be considered. The time limit of exemption of WT u/s 80-IA