Rental power plants to pay less for importing equipment

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Doulot Akter Mala
The National Board of Revenue (NBR) has decided to reduce duties and taxes levied against import of equipment for rental power plants to help them sell electricity to the power division at a reduced rates.
The existing tax incidences, including value added tax (VAT), customs duty (CD), supplementary duty (SD), advance income tax (AIT) on import of rental power plant equipment is now around 30 per cent. The rate will now be re-structured at a level not exceeding 10 per cent.
The board will issue a Statutory Regulatory Order (SRO) in this connection within a few days.
The NBR has sent the proposal to the law ministry for its vetting, sources concerned said.
Sources said the power division has been pursuing the board to reduce the tax incidence to 6.0 per cent for import of equipment aiming to lower the installation costs of those power plants.
The board also received requests to waive income tax to be generated from the profits of the proposed rental power plants. But it has ruled out such a possibility.
Recently, the government approved setting up of 20 rental power plants for resolving the acute power shortage on an urgent basis.
Installation of a power plant having higher generation capacity takes at least three years while the same of a small rental power plant takes only a year, a power division source said.
The government has selected separate locations for the installation of 14 rental power plants in the first phase and six in the second phase, he said.
The power division expects to supply 660 megawatt (MW) power by July 2008 from the rental power plants, he said.
The power division has to procure power at a high price from the independent power producers (IPPs). In order to lower the purchase price, it is trying to reduce the production cost through lower rate of duties and taxes, he added.
Presently, the Power Development Board (PDB) has been supplying power at a lower price than its cost of procurement.
The cash-starved PDB will have to shoulder added financial burden when they start purchasing electricity from those rental power plants, a power division official said.
The government has been incurring loss of about Tk 13 billion (1300 crore) annually because of the mismatch between procurement and sale costs.