Mohinder Verma
JAMMU, June 19: In order to make the most important1000 Mega Watt Pakaldul Hydroelectric Project financially viable and bring the project cost to reasonable level, the State Cabinet today announced several concessions, which include exemption of taxes and water usage charges.
This project was to be executed by NHPC, which had done all preliminary works like investigation and DPR formulation, procurement of various statutory clearances. However, the State Government vide Administrative Council decision dated October 24, 2008 decided to execute the project through Chenab Valley Power Projects Private Limited, a Joint Venture company formed between NHPC, Jammu and Kashmir State Power Development Corporation and Power Trading Corporation.
Authoritative sources told EXCELSIOR that the completion cost of the project at June 2012 price level is estimated at Rs 12663.03 crore with likely tariff of Rs 8.22 per unit and at such a high tariff, the project would be commercially unviable”.
“Moreover, the industry norm for Debt Equity Ratio for Hydroelectric Projects is 70:30 and following the norm, 30% of the project cost was to be infused by the promoters of the company as equity”, they said, adding “since the equity investment amount exceeds Rs 500 crore for major partners—JKSPDC and NHPC, the issue reached before the Public Investment Board for its clearance”.
The PIB in its meeting on May 8, 2013 under the chairmanship of Finance Secretary, Department of Expenditure, Government of India noted that the project cost was too high resulting in unsustainable first year tariff of Rs 9.74 per unit and the levelized tariff of Rs 8.22 per unit on completion cost, sources informed.
Accordingly, the PIB issued directions for re-formulation of the project with the suggestions that Debt Equity Ratio of 70:30 be revisited, J&K Government may consider ways to reduce land cost and incidence of State taxes and efforts may be made to reduce the completion period from 6 years.
As the project is of much importance for Jammu and Kashmir in view of the fact that it will produce around 3.330 billion units of energy per year and will add to the irrigation potential in the State besides leading to generation of enhanced energy from downstream projects like Dulhasti, Ratle, Baglihar, Sawlakote, Salal and Dulhasti-II, the State Government early this year decided to provide concessions if the Union Government also contributes by providing Rs 2500 crore subordinate debt.
Following this decision of the State, Public Investment Board convened its meeting on February 3, 2014 wherein it was agreed by the Union Finance Ministry to support and facilitate the project by way of subordinate debt of Rs 2500 crore subject to the condition that the Government will waive WCT/Entry Tax, Water Usage Charges and 12% free power from the project.
In order to make the project commercially viable, the State Cabinet today gave nod to the exemption from Works Contract Tax/Entry Tax and waiver of 12% free power as well as water user charges for a period of 10 years from the completion of the project. Moreover, the Cabinet gave nod to the issuance of consent to the purchase of 49% of power from Pakaldul project, sources said.
In response to a question, they said, “exemption from WCT/Entry Tax is available to all projects under Prime Minister’s Reconstruction Programme and Pakaldul was also a part of PMRP project to be executed by NHPC and would have been exempted from taxes as per the norms of the programme”.
Moreover, the exemption of water usage charges is available as an incentive to IPP projects for 10 years under the State Hydel Policy of 2011 and can be considered as an incentive to the JVC to make its first project take off on commercially viable lines. “Since, J&K has first right of refusal for the entire power generated from the projects, waiver of 12% free power will ultimately lower the cost of total energy purchased by the State from the project”, they added.
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