DPC president Neil McGegor, in a communication to the state energy minister Padmasinh Patil has said that at currently prevailing naphtha prices, the Maharashtra State Electricity Board (MSEB) would have to bear an additional burden of around Rs 71.5 crore in 2001 as a result of the net impact of local sales tax. "As the cost of fuel is passed through to MSEB under the provisions of the power purchase agreement, any tax levied on the purchase of naphtha will lead to an rise in tariff and which will be an additional burden on consumers across the state," he added.

Mr McGregor strongly stressed the need for the full waiver of sales tax on the procurement of 1.2 million metric ton naphtha during calendar year 2001 from the state-run Indian Oil Corporation (IOC) for generation of electricity at Dabhol plant. The procurement of naphtha from IOC would attract local sales tax at 15.3 per cent under entry schedule C-II/77 of Bombay Sales Tax Act, 1959. This would be offset to a net effect of 5.4 per cent upon submission of form E by DPC.

"Given the effects of a tariff increase for electricity customers in the state of Maharashtra, we therefore request you to grant us full exemption of tax on local purchase of naphtha by issuing necessary notification under section 41 of Bombay Sales Tax Act," Mr McGegor added.

The DPC president said that the company would like to point out that while importing naphtha for Dabhol project since December 1998, it has not paid any local sales tax on naphtha purchases. "Hence, the state's revenue status is in no way affected as a result of DPC procuring it locally from IOC," he added.

Mr McGregor's appeals deserves special significance especially when the state finance department has expressed its inability to provide sales tax waiver on the procurement of naphtha from IOC. The department has opined that the DPC would have to pay a minimum sales tax of 4 per cent.

However, Mantralaya sources told The Financial Express that the final decision would be taken by the state cabinet in due course of time. These sources recalled that the chief minister Vilasrao Deshmukh about three weeks ago has already ruled out possibility of providing sales tax exemption to DPC on account of the `precarious' financial condition.

State to take decision on Dabhol phase-II
Chief Minister Vilasrao Deshmukh on Friday said the Dabhol phase-II was non-profitable to the state and the Democratic Front (DF) government led by him would take a final decision to scrap or renegotiate it. Talking to reporters at Ujalaiwadi airport near Kolhapurr before leaving for Bangalore, Mr Deshmukh said some leaders of the constituents of the DF government were opposing the project. However, the decision would be taken after a thorough discussion in the cabinet, he added.