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The formal clearance for the Rs 11,000 crore (Rs 110 billion) proposal for setting up a 2,000 hectare-multi-product SEZ by Reliance Energy Generation Ltd has been delayed.
This is because the revenue department objected to the possible tax loss from the power plant being located in the SEZ.
Reliance is planning to develop a generation capacity of 1,400 mw in the first stage. The production is expected to start by 2008-09, when gas supplies begins from Reliance Industry Ltd find in the Krishna-Godavari basin.
The company had already agreed to a power sale price of Rs 2 per unit with the Uttar Pradesh government, company executives said.
Once it becomes functional, the plant will ease Delhi's power woes, too. The city, at present, buys power at about Rs 3.61 per unit during peak hours (5 pm to 11 pm) and at Rs 3.10 during off-peak hours.
Till 2007, Transco has to arrange power for the Delhi discoms. There is little clarity on how the situation will be handled after that.
"The bulk supply agreement with the discoms is in perpetuity. But, under the Electricity Act, discoms can arrange for power in a transparent manner as approved by the regulatory commission," said a Delhi government official.
If Delhi Transco arranges for power, Dadri will have to bid along with other suppliers to supply power to Delhi. In such a situation, a plant based in Delhi will have a tariff advantage. Tata Power Ltd is planing a 1,000 mw plant in Bawana.
The Dadri plant, being in an SEZ, will have direct tax benefits like exemption from the minimum alternate tax, dividend distribution tax and customs duty exemption.
This will reduce capital costs and tariffs. With wheeling charges in the northern grid at a little less than 15 paise, this power may be cheaper than that being currently bought. Also, the existing transmission line capacity may be adequate to handle the transfer.
