Stating that the governments decision to ask power firms to furnish fixed deposit receipts (FDRs) to avail duty concessions under mega power projects policy may unleash a huge financial burden on them,power minister Sushilkumar Shinde has sought finance minister Pranab Mukherjees intervention to allow producers to also provide bank guarantees to help them ease the burden.
Producers importing equipment for mega power projects are required to provide a certificate of authorisation from the power ministry within a period of three years from the date of import to avail customs duty concession.
To prevent the misuse of customs duty benefits,the finance ministry has made it mandatory for equipment importers to furnish FDRs till they provide the certificate of authorisation. In case the importer fails to do so,the financial guarantee is slated to be deducted as customs duty.
Shinde,in a letter to Mukherjee on May 15,said that the revenue department had shot down the power ministrys recommendation on furnishing bank guarantees in addition to FDRs,saying that it was an untenable suggestion since huge government revenues are involved. Developers,led by the Association of Power Producers,have also represented to the power and finance ministries stating that developers who have already obtained provisional mega certificates should be allowed bank guarantees.
Besides affecting cash flows it will result in changing the utilisation of funds sanctioned by the Financial Institutions who have appraised the project considering the fiscal benefits allowed under the mega power project policy, Shinde told Mukherjee. Power producers have said,Furnishing FDRs makes it difficult in sourcing funds,while the treatment of interest on FDs is not clear. Most importantly FDRs can be obtained by the project developer with lien marked to the government.
I would request you to kindly re-consider the matter and allow the option of bank guarantee in addition to fixed deposit receipts for availing mega power benefits to the developers of mega project and having provisional mega certificate, the power minister urged Mukherjee.