Centre weighs sops for rural power projects

NEW DELHI: The government is considering a host of fiscal incentives to encourage setting up power projects in rural areas.

The UPA government’s Common Minimum Programme aims at complete electrification of rural households in five years. Rural electrification and energy conservation are expected to be the leitmotif of Budget ’05 for the power sector.

The fiscal package being considered hopes to encourage new and private players to serve the rural constituency. Special rebates are being considered for setting up power projects in rural areas.

Concessions are likely to be extended for taking up distribution, renovation and maintenance of rural power infrastructure.

State electricity boards making capital investments to expand rural electrification are expected to be given special interest rates of 2% to 4%.

This special interest rate could also be given to private companies to make entry into rural areas attractive, sources said.

The ministry has proposed a 100% tax/duty exemption on equipment and fuel used for creating infrastructure of decentralised generation and distribution system in rural areas.

Energy conservation measures have the potential of saving 23,000 MW leading to a total saving of Rs 100,000 crore in fresh investment.

To speed up the adoption of energy conservation measures, the ministry will seek an incentive package to promote conservation in urban areas.

This would include exemption of energy service companies and energy management companies providing efficient service to different sectors from paying the 10.2% service tax.

The other component would be a reduction of duties on energy conservation products to 2%.
Currently a customs duty of 20% is levied on these products.