New Tax Regime to Lower Cost of Thermal Power after GST

New Tax Regime to Lower Cost of Thermal Power after GST

HYDERABAD: The introduction of the Goods and Services Tax (GST) is set to reduce the cost of power in Telangana as most of its electricity comes from thermal stations.The GST council proposed 5 per cent tax slab for coal while imported coal is set to attract basic customs duty. Telangana largely depends on thermal stations for its daily power generation of over 4,083 MW installed capacity with the Kothagudem, Kakatiya, Ramagundam and Singareni thermal stations pumping more than 3,000 MW power into the state grid to cater to the needs of over 4 crore people.
The GST slab for coal varies from 11 to 12 per cent, and is expected to lead to a positive impact on coal users and a negative one for those who import it. The effective price of coal for consumers is likely to decrease by Rs 100-150 under the new tax regime.

The Telangana Genco officials are still working on the total impact of the GST on the sector, but their preliminary estimates suggest that consumers were effectively charged 11-11.5 per cent for procurement, which has decreased to five per cent under the uniform GST system. Giving more relief, the GST will subsume the stowing cess, value added tax (VAT) and excise duty being paid by coal consumers. “We are expecting a positive relief to Genco as the GST for coal will reduce coal prices and thus cut the cost of thermal power generation.Most of our expansion plans pertain to thermal units and with the introduction of GST, it will be beneficial to the sector,” D Prabhakar Rao, chair man & managing director, Telangana Genco and Transco, told TOI.

Telangana has proposed major capacity addition after the TRS came to power in 2014.Work on 1,080-MW Bhadradri thermal power project, which was cleared by the environment ministry , is going on at a brisk pace. A fortnight ago, the environment ministry also cleared the 4,000 MW Yadadri thermal power project at Damaracharla in Nalgonda district. Apart from these, Singareni Collieries, which has built the 1,200 MW pit head power project, is also planning to set up another unit to add 600 MW while the NTPC is in the process of implementing the 4,000 MW thermal power project at Jyothi Nagar.

“All this requires more than 30 million tons of coal linkage and this source being the major input for these forthcoming units, introduction of GST is set to reduce the cost of generation,” pointed a senior official in energy department.

For Telangana, the total installed capacity available as on March 2015 from the state generating stations of TGenco is 4,083 MW and currently these Genco plants are totally dependent on domestic coal. Genco is already facing a shortage of 9% in coal supply as against the coal requirement of plants accounting for a total shortage of 2.49 MTPA.

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