GST on hydropower should be on par with wind, solar: Assocham

New Delhi, Nov 30 (IANS) The GST rates for hydropower should be brought at par with wind and solar, so that value added cost and tax are commensurate for all renewable power projects, industry chamber Assocham said on Thursday.

This, among other suggestions, to revive the languishing hydropower sector in the country have been made in an Assocham paper titled "Need for Hydropower in India - Industry Submission", which was released by Union Power and New and Renewable Energy Minister R.K. Singh here on Wednesday evening.

"Assocham has urged the Centre to fix Goods and Services Tax (GST) rates for hydropower at par with wind and solar, so that value added cost and tax are commensurate for all renewable power projects," the industry body said in a statement.

"Hydro projects attract 18 per cent GST for equipment and 28 per cent for cement, while the same for solar is five per cent for Engineering, Procurement and Construction (EPC), which has a glaring additional cost impact on power produced from hydro projects," noted the Assocham paper.

Besides, EPC contracts for hydropower projects should also be categorised under the lowest GST slab of 5 per cent, it said.

"Currently, electricity at the consumer end or at discom end does not attract any GST and therefore the last leg of consumption of GST is with the generator," Assocham said.

Releasing the Assocham paper, the Power Minister said a draft hydro power policy is being finalised for being placed before the Union Cabinet.

"A sector which has failed to add even 2,500MW of capacity in the last five years is in urgent need of revival, given that only hydro power can help balance the grid in absorbing the much higher levels of renewable energy planned to be progressively introduced by the government," Singh said at Assocham's roundtable with stakeholders.

"The 175 gigawatt (GW) capacity target from renewable sources is given and is part of our international obligations (on climate change). To balance the grid, it needs balancing power and for that hydro fits the bill," he said.

He noted that hydroelectric power did not have to be imported, unlike gas, which could also perform the grid balancing function.

"We have a policy in the works for hydropower development which will be placed shortly before the Cabinet for approval. States are interested in its development and it is necessary for our future," the minister said referring to the environmental benefits of hydroelectricity.

"Renewables go with hydro for grid purposes also because the costs of solar and wind power have become quite cheap," he added.

Multipurpose projects, which were at the centre of India's development strategy post-Independence, have become unviable because of revenue issues and the sector is saddled with a large share of stalled projects and stressed assets.

Singh said that the ministry had received various suggestions from stakeholders on a scheme of financial incentives.

"Some of these suggestions spoke of increasing the period of loan as well as the depreciation period, which would help reduce the tariff," he said.

The Assocham paper suggested that government should support commissioned and under-construction projects through power purchase agreements (PPAs) and by mandating hydro purchase obligations (HPOs).

It also recommended that states waive the current free power requirement which would help reduce tariff in the initial years and make the project "more viable and competitive".