Debt servicing: Govt cuts tax burden on stressed power plants

The power ministry has updated the definition of “statutory payments” in its latest order on the debt servicing mechanism for stressed power generation assets, effectively leaving more money for debt-servicing with the firms concerned and reducing their tax burden.
The latest clarification modifies a recent order on the creation of ‘Trust Retention Account’ (TRA) by stressed power plants which are receiving coal through the Shakti scheme. The power ministry has now clarified that that revenue deposited in the TRA would be used to clear taxes and duties only for additional electricity that plants are producing from the extra coal they receive through the Shakti scheme. So, tax obligations from power produced from other sources of coal won’t now burden stressed units.

According to a recent ministry note, reviewed by FE, “statutory payments” is now defined as “all payments towards statutory dues arising from incremental generation from this (Shakti) scheme”. Power ministry’s August 5 order on TRA described the term as “all payments towards statutory dues”.