(DNA)
The central government’s recent decision to lower the corporate tax rate is a positive development for the power sector, as it would allow the electricity generators with cost-plus power purchase agreements (PPAs) to pass on the lower tax benefit to the distribution utilities (discoms). As per Icra’s estimates, the extent of benefit that would accrue to discoms from the power generation and transmission segments (mainly from central and state utilities), would be about Rs 2,500 crore annually.
Sabyasachi Majumdar, senior vice-president, Icra, said, “The benefit so accrued to discoms, in turn, would enable them to lower their cost of supply and hence, reduce the gap between average tariff and cost of power supply by about three paise per unit sold at all India level. However, the extent of reduction in gap for the discoms would vary across the states depending on the mix of cost-plus and bid-based PPAs and share of supply from central sector companies.”
