DEC 25: The Central Electricity Regulatory Commission (CERC) has asked the central government whether it intends to tax the surcharge collected by the central power generating units from the tariff collected from the state electricity boards.In its tariff order for the central generating utilities, CERC though "convinced" about development surcharge being exempt from taxes, has asked the central government to issue a clarification on this matter to avoid any controversy.
The Commission in its order has chosen the option of surcharge to raise funds for the sector as the other option of levying a cess has not made any progress.CERC points that it would not be "content" with a "mere suggestion" to the government to levy a cess and since the CERC has the powers to mobilise funds for the future under the ERC Act it is well within its rights to do so.
The surcharge being collected through tariff would be used by the utilities to fund the future requirements which has been estimated at Rs 65000 crore by the end of the 11th plan.
Collection of funds for future requirements has always been a bone of contention between the centre and the states as the states feel that this would lead to higher costs and would be used for purposes where the states themselves would not benefit.
CERC in its order has cited that the surcharge burden would be "affordable and reasonable" and has directed the central public sector power undertakings to create seperate bank accounts for the collection of surcharge through power tariffs. CERC has given the utilities freedom to invest in securities of recognised funds such as those of IDFC or IDBI tax free bonds so that income therefrom shall also be credited to that bank account.
Furthermore CERC has directed the utility to also maintain separate accounts in its books and reflect the balance in the Development Surcharge Reserve Account and the investment represented against the same in their balance sheet. The CERC has fixed a funding limit of one third of the equity portion for any new venture in a region from the surcharge fund.
The surcharge to be collected would be calculated on the basis of fixed charges raised by the utilities in respect of generation/transmission at regional levels. For NTPC, NLC and NHPC the rate is 5 percent, while for Power Grid the rate is 10 per cent. The charge for NHPC would be both for capacity and energy charges.
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