Himachal Cabinet reverts to old free power royalty slabs

Shimla, August 25

The government has reverted to the old free power royalty slabs of 12 per cent, 18 per cent and 30 per cent instead of the proposed slabs of 20 per cent, 30 per cent and 40 per cent in the power sector. Aiming to provide relief to the power sector entrepreneurs, the decision was approved in the Cabinet meeting held today.

“It was felt that there wouldn’t be many takers for the power projects at the proposed slabs of 20 per cent, 30 per cent and 40 per cent at the moment. So, it was decided to revert back to the previous slabs of 12, 18 and 30 per cent,” sources told The Tribune.

The free power royalty is 12 per cent for the first 12 years, 18 per cent for the next 18 years and 30 per cent for the last 10 years. Incidentally, the private power producers pay the free power royalty in three ascending slabs over a period of 40 years, but the projects owned by PSUs like SJVNL and NPTC give free power at a flat rate of 12 per cent for the entire duration of the project. The government wants these PSUs to pay royalty just like the independent power producers in three slabs. “The matter regarding the royalty from the PSUs is in the court. The government has fixed the slabs at 12, 18 and 30 per cent,” the sources said.

On the face of it, the slash in the free power royalty slabs will provide a big relief to power producers. However, Rajesh Sharma, president, Bonafide Hydro Developers Association, feels the sector needs a greater assistance from the government.

“The reduction in royalty slabs is fine but the new projects were not coming up at these royalty rates in the past. Some projects came up when the previous BJP government deferred the 12 per cent royalty for the first 12 years. The current government also needs to offer deferment facility or should charge a flat 12 per cent royalty. It’s only then investors will come forward,” said Sharma.

He further said that the hydropower projects had become high risk projects as several projects have been washed away in the last two years.