The Empowered Group of Ministers on Dabhol, which met today, has approved mega power status for the Dabhol power project and ruled that no capital gains tax needs to be paid as all lenders and shareholders had taken a 'haircut' on the deal.

"The benefits extended to mega projects will be available to the Dabhol plant subject to the condition that some power is sold to states other than Maharashtra," said sources. The Maharashtra government has agreed to buy all the power generated by the plant, but to qualify for mega-status, power plants have to necessarily sell to other states.

The EGoM also decided to make a recommendation for customs duty waiver on LNG for the plant. The proposal will be forwarded to the Cabinet Committee on Economic Affairs.

At the Energy Coordination Committee meeting last week, Finance Minister P Chidambaram agreed on the need for duty waiver for all LNG plants in view of the high LNG prices.

The 10-year tax holiday under 80 IA of the Income Tax Act, applicable for greenfield projects, will also to be extended to the Dabhol plant. The EGoM agreed to clear the exemption for the project.

The benefits approved by the EGoM headed by defence minister Pranab Mukherjee will be sent to the Cabinet Committee on Economic Affairs to help in the early start of the project.

"The benefits would ensure that the cost of power was kept around Rs 2.30 a unit,'" said an official.

The details of the restart are being worked out by National Thermal Power [Get Quote] Corporation Ltd and GAIL (India) Ltd, stakeholders in Ratnagiri Gas & Power Private Ltd, the special purpose vehicle for restarting the 2,184 MW plant.

Power factor No capital gains tax as all lenders and shareholders had taken a haircut on the deal. Customs waiver likely on LNG supplied to the project 10-year tax holiday under 80 IA of the I-T Act, applicable for greenfield projects Benefits to ensure that the cost of power is kept around Rs 2.30 a unit