Although the state government has excluded the cash-strapped Maharashtra State Electricity Board (MSEB) from the tax, bulk licensees such as Tata Power and BSES would come under the scheme.

Both the bulk licensees, however, have the option to pass on the effect of the tax hike to its consumers. The government expects Tata Power to increase the existing tariff by eight paise per unit, while BSES is likely to increase the tariff by 10 paise per unit.

As a result, Bombay Electricity Supply and Transport (BEST) may also be compelled to hike power tariff. BEST, which is an undertaking of the Bombay Municipal Corporation, purchases power from Tata Power.

Tata Power would have to shell out as much as Rs 80 crore following the imposition of the new levy. The government expects to raise a revenue of Rs 31 crore by roping in BSES in the tax net. During 1998-99, Tata Power paid Rs 18.41 crore to the state exchequer while the balance Rs 41.51 crore was collected from MSEB. Currently, the state levies one per cent tax on the charges of sale of power by bulk licensee to consumer or power distribution company. According to the energy department, nearly 8,000 million units of the total generation of 8,524 million units by Tata Power would be taxable for the year 1998-99. In case of BSES, of the total generated power of 3,251 million units, it would have to pay tax for 3,100 million units.

The government has changed the status of bulk licensee to generating licensee especially to bring in BSES in the purview of this tax.

The government will thus amend the Maharashtra Sale of Power Act 1963 to effect the change. The government has also decided to relax the condition of payment of such tax by a bulk licensee which sells more than two million units during a year. Henceforth, no such limit would be necessary for tax collection. Chief minister Vilsarao Deshmukh said that the decision has been taken as per the commitment made in this year's annual budget. He said the money generated through this tax would be used for rural electrification.