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Power tariffs lowered for infrastructure projects

A presidential ordinance amending the Income Tax Act would have the effect of lowering power tariff rates, an official note said on Wednesday.

According to the note, the Income-Tax Ordinance has been promulgated under Article 123 of the Constitution and seeks to amend Section 32 which allows power generating units to depreciate their capital assets using the straight-line method at the same rate at which it is reimbursed by the state electricity board.

With this amendment, there will be lower tax reimbursement by the state electricity boards and consequently lower power tariff rates which would also help fast-track projects.

The ordinance mainly provides tax incentives to industrial undertakings engaged in the business of power generation, commercial production of mineral oil, construction of highway infrastructure, and those located in certain industrially backward districts of the country.

According to the note, the benefit of deduction will take effect from 1st April 1997.

The ordinance has also extended the cutoff date to March 31, 2000 AD, as against the earlier date of March 31, 1998, for availing of tax benefits by undertakings which generate and distribute power.

The benefit of deduction available to infrastructure facility has been extended to housing and other development activities which are an integrated part of a highway project with a condition that the profits of such housing and other development activities shall be ploughed back to highway projects within a period of three years.

This will facilitate in improving the financial viability of many BOT (build, operate, and transfer) projects, in the road sector. This deduction is available in respect of assessment year 1998-99 and subsequent years.

The time limit for availing the tax holiday has been extended from 12 years to 20 years in respect of highway projects.

The ordinance, promulgated on Tuesday, is one in a series of measures initiated by the government since the budget to give a kick-start to infrastructure development in the country.

It may be recalled that in the budget 1997-98, the finance minister had announced a series of measures for giving a boost to infrastructure development especially in the areas of power, petroleum, ports, roads and telecom sectors.

Over and above, the budget provision for the power sector, the finance minister had provided an additional Rs 4 billion for development of this sector.

In recent days, the Reserve Bank has relaxed group exposure norms and removed monetary limits for financing of infrastructure projects.

UNI