Guidelines soon for power plants in SEZs

NEW DELHI: The government will shortly come out with guidelines for setting up power plants in special economic zones (SEZ). While it has been decided that power plants have to be designed primarily for SEZ usage and only surplus could be for sale outside, a decision is yet to be taken on what would constitute the surplus.

The commerce ministry has also decided not to extend tax benefits such as income-tax and excise exemption to power plant owners on the power sold outside the SEZs. The revenue department wants power units in SEZs to sell as much as 75% of the power generated to units within SEZs. The balance 25% of the power produced could be classified as surplus and sold to units in the domestic tariff area.

Talking to ET, commerce ministry officials said that a final decision on how much of the total power generated could be classified as surplus and hence allowed to be sold in the DTA would be taken soon. “When we decide on the final classification, we will notify it in the guidelines,” an official said.

The revenue department wants units producing power in SEZs to sell the balance 25% power to DTA at a price which would ensure that no undue benefit or profiteering occurs. This is because these units get huge customs and excise benefits on the plant and machinery, which are not available to their counterparts in the DTA.

While the guidelines for setting up of infrastructure in SEZs have been notified in October this year, a need was felt for bringing in separate guidelines for power producers. Restricting power producers in SEZ on the basis of pricing had been discussed earlier in the board of approval meetings.

With this measure, if the units sell power, they will have to build in the cost of the customs and excise duty, which they have got exemption from and then work out their cost structure. These guidelines will address the concerns that were expressed when some players had announced power plants in SEZs.