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kwh, so that the total impact is 13 paisa / KWH. Important fuels should be declared as “Declared Goods” so that  nobody can charge more than 4%. Gas has unjustified wide variations in sales tax from one state to another. In Gujarat it is 17.6% (Rs. 36.07/KWH) and in Rajasthan it is 4% (Rs. 8.38/KWH). When the same gas goes to fertilizer industry we want to subsidize it and reduce the prices. Gas as a fuel should be treated at the same level for power industry as well. The prices of Naptha in NTPC’s case alone vary from 2.5% to 17.6%.  The impact is 20 paisa.  Naphtha is free of customs duty when used for fertilizer industry but for power 10% is charged.  On HSD excise duty of 14% is charged and additional excise duty of Rs. 1000 per Ltr. is charged. It should also be free for power.

West Bengal charges rural education cess of 20% of the coal value and primary education cess of 5%.  The coal that reaches power plants is of lesser grade than what is declared. Even if power pay as per the actual category of coal received, the royalty is charged as per the declared quality of the mine.  The difference can be between Rs. 50-95 per ton.  

Producers’ price of gas at Dadri is Rs. 2016 per 1000 SCM.  Consumer price is Rs. 2850 per 1000 SCM.  Transportation charge by the time it comes to Dadri is Rs. 1350, almost 50% of the producer’s cost.  There is 10% royalty, tax of Gujarat Government on gas as produced, additional tax of 10% on the sales tax, entry tax, local sales tax, turnover tax, surcharge on the turnover tax and again sales tax varying from 5 – 22%. The total impact of all these taxes (92 paisa variable charge) is approximately 15-20 paisa which is the constituent of taxation alone.

Mr. R. Krishanmurthy considered the vagaries in the Indian Income Tax Act and its effect on the cost of borrowings and the impact on power sector.  Withholding Tax (WT) which was available on foreign borrowings was withdrawn by GOI last year.  We are hence not able for example, to take advantage of the historically low cost of Japanese Yen which is prevailing today.  There is always a grossing up of 20-25%.  If we are able to get an all-inclusive cost of 5%, the grossing up of 22-25% increases the cost. Only where we have ECA credit facility or double taxation avoidance agreements, the incidence of taxes can be lower.

External Commercial Borrowings have been a good instrument for financing of a project.  ECB made prior to June 2006 will continue to enjoy the benefit of WT exemption u/s 10-15-4F.  PFC took up this issue with GOI and expanded the scope of definition of interest by way of explanation u/s 10-15-4 explanation

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