should be increased to 2012.
Ms. Saroj Punhani said that to reduce the cost of power ways of reducing the cost of inputs must be examined. The various issues taxation can have incidence on our capital equipment required for power project, supplies coming from abroad or in house, financing and income accrued by the power companies. Even if it is a pass through it has an effect on the tariff which is ultimately borne by the consumer. From the developers point of view, duty free import should be extended to all the items related to a project, EPC contracors/sub-contractors, which will have an ultimate impact on tariff. There should not any WT on the financial borrowings. Exemption of stamp duty by state govts. can also bring down tariff significantly. For example, in Hirma project the stamp duty alone was Rs. 400 crores. There are a lot of grey areas in the provision of income tax. If a contractor has a branch office in India and is importing form outside, the entire income on that account attracts lot of taxes. If it is a lumpsum turn key project, all the supplies and engineering designs are not defined separately, it again attracts taxes. It is desirable from the developers’ point of view that the income derived from the contractor on CIF value of supply of goods from outside India should be tax exempt. If the R&D cess can be waived or addressed in a treaty with a particular country this, this will bring down the cost.
Mr. R. Krishnamurthy offered to study the incidence of tax on tariff and to undertake case studies of two/three projects which are under the process of commissioning, have been commissioned or are just starting, to see the implications of various tax clauses. PFC can finance and outsource a good agency, putting the recommendations before the govt. and regulatory authorities. Hedging cost has been a bone of contention between power producers and regulators. Now CERC has agreed to allow part of the hedging cost to be inbuilt in the tariff.
Mr. Seth Vedantham said that if there is reduction of customs duty, domestic manufacturing will suffer. It is not the tariff that matters to the govt. but the preference of domestic fuels over imported fuel. Why should there be less tax on mega power projects? For big projects, Govt. has given 10 years tax holiday and with depreciation for 4 years, 14 years is enough time to structure the tariff. For India, main fuel is coal. The customs duty on LNG is 5-10% but the basic cost is high. India cannot afford costly fuels. Tariff has to be low. There is no need for national fuel policy because it is the competitiveness for a better tariff that will determine the cost of power.