Budget 2010 carries proposals involving up surged financial outlays for the Renewable Energy. The thrust for clean energy is augmented by introduction of carbon tax on production and importation of coal, slashing of duties for solar, wind and other RE sources and the formation of the National Clean Energy Fund.
Direct tax proposals specific to the Power Sector are limited, with material movements in the duty structure of indirect taxes.
These policy reforms along with increased financial aid being articulated in the National Missions for Climate Change will define a new fiscal and regulatory landscape for the Power Industry.
Policy / Financial Reforms for Power & RE Sector
Power
Plan allocation increased from INR 22.3 billion in 2009-10 to INR 51.3 billion in 2010-11.
Introduction of competitive bidding process for allocating coal blocks for captive mining
Proposal set up a "Coal Regulatory Authority" for facilitating issues including economic pricing of coal and benchmarking of standards of performance
Renewables
Increase in outlay for the Ministry of New and Renewable Energy by 61 percent from INR 6.2 billion in 2009-10 to INR 10 billion in 2010-11
Proposal to set up solar, small hydro and micro power projects at a cost of about INR 5 billion in Ladakh region of Jammu and Kashmir
To ameliorate the negative environmental consequences and increased pollution levels associated with industrialization and urbanization, the Budget proposes as follows:
Setting up of National Clean Energy Fund for funding research and innovative clean energy technologies;
The fund to be capitalized by levy of carbon tax on coal produced domestically as well as imported coal at the rate of INR 50 per tonne.
Tax Structure for Power & RE Sector
Direct Tax
The rate of Minimum Alternate Tax (MAT) increased from 15 percent to 18 percent
Surcharge on domestic companies reduced from 10 percent to 7.5 percent
Services do not need to be rendered in India for being deemed to accrue or arise in India
No proposal to settle the controversy on availability of tax holiday for natural gas production from pre-NELP and first seven rounds of NELP
Indirect Tax
Power
Import of electrical energy (including removal from SEZ to DTA and non-processing zones of SEZ) attracts BCD at a specific rate of INR 2,000 per 1,000 kWh.
Clean energy cess imposed as a duty of excise on coal, lignite and peat produced in India. Import of coal will also attract clean energy cess (to be collected as CVD). As per the FM’s indication the clean energy cess will at the rate of Rs 50 per tonne.
Exemption from excise duty on goods supplied to mega power projects from which the supply of power has been tied up through tariff based competitive bidding or a mega power project awarded to a developer on the basis of such bidding, subject to specified conditions.
Transmission of electricity exempt from levy of service tax
Renewables
Photovoltaic and solar thermal power generating projects - Concessional BCD of 5 percent and excise exemption (and consequently CVD) on all items of machinery including prime movers, instruments, apparatus and appliances, control gear and transmission equipment and auxiliary equipment and components required for initial set up.
Geo-thermal energy - Ground Source Heat Pumps exempt from BCD and additional CVD
Wind energy generators - Existing exemption from excise duty on specified goods such as epoxy resin, adhesive resin, vinyl ester adhesives etc used for the manufacture of rotor blades is now extended to polyester based infusion resin and hand layup resin (both covered under HSN 3907 9190) and gel coat and hardener (both falling under HSN 3208 1090) used with such polyester based resins
LED lights - Excise duty reduced from 8 percent to 4 percent
Import of compostable polymer exempt from BCD
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