Mumbai, Sept 08: The Union ministries of power and finance are at loggerheads over the latter’s proposal for extending mega-power project status to thermal projects of 250 mw capacity. The current policy envisages such status only for thermal projects with generation capacity over 1,000 mw and hydro-projects over 500 mw. Curiously, the Planning Commission has also raised eyebrows on the power ministry proposal for extending such status for 250 mw thermal projects, and has termed it an unwarranted development. In 1999, the Centre had notified 18 power projects as mega-projects, conferring upon them various duty and licensing benefits. The financial incentives included complete waiver of import duty on plant and equipment and a tax holiday of 10 years. The power ministry is believed to have been prompted to make the proposal following a strong plea made by one of the allies of the NDA government at the Centre, which wants to bail out a power project in the state it rules.
BR> The power ministry, whose Cabinet note -A -118/2003/ IPC- has been circulated to various ministries for opinion, has emphasised the need for covering thermal projects with generating capacity of 250 mw from public and private sectors to promote capacity addition in a big way. Union power ministry sources told FE that the proposal is currently awaiting Cabinet approval, adding it has been made in a serious bid to boost power generation to reach the capacity addition target of 1 lakh megawatt by 2012. According to the proposal, 25 per cent of power from such projects will have to be exported inter-state.

However, the Union finance ministry has commented that such a proposal should not have been moved at this point of time when the power ministry has set up a high-level task force headed by the Planning Commission member NK Singh to consider a fiscal package, among others, to encourage investments in power sector.
The move to set up the task force was in the wake of newly-enacted Electricity Act (EA) 2003. The task force, which also includes the Union revenue secretary, is expected to submit its report by December-end.

Besides, finance ministry and Planning Commission have separately wondered why the mega-status should be accorded only to generation projects, especially when EA 2003 talks at length about giving simultaneous boost to generation, transmission and distribution segments, in a bid to transform the power sector. It feels that with aggregate transmission and distribution losses crossing Rs 40,000-crore mark, the ministry should have focused on such projects in its proposal.

Power ministry sources admitted that these views have been expressed by the finance ministry and Planning Commission. However, the Union Cabinet would take the final decision, sources said.