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Thursday, March 24, 2011

Absorption of electricity duties in GST: MCI to examine impact on power tariffs

Even as the proposed Goods and Service Tax (GST) regime, which aims to provide a common national market for all goods and services, will take some more time to be introduced, apprehensions regarding its likely impact on power tariffs have already been expressed. 
  • Therefore, the Ministry of Commerce and Industry (MCI) is expected to come up with an analysis on the impact of the GST subsuming all electricity duties. For this purpose, it has asked all power generation companies to furnish the relevant data. 
  • NTPC has already submitted the information required to the ministry, in the form of figures for taxes embedded in the costs for a typical 1000 MW coal based power plant (assuming Simhadri TPP), the latest audited financial results for FY 2009-10, details with respect to expenditure and income of the company during 2009-10 and technical information on installed capacity, generation, PLF etc. 
  • Pertinently, given the current administrative structure of energy industry in India, absorption of all state electricity duties under the GST regime may not be feasible, as the cost of power generation differs from mode to mode and in many cases from plant to plant. Moreover, electricity tariffs are arrived at differently across states, without a uniform scientific model for electricity pricing.   
  • Further, administrative problems can arise in accounting for the transmission and distribution losses between states. Also, before such a regime is introduced, the multifarious agencies and authorities in the power sector need to be integrated.  

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