Supplement, Oil & Energy

Private Power plants to get more tax facilities

Published : 18 Jan 2020 08:22 PM | Updated : 06 Sep 2020 10:13 AM

The government has extended more tax facilities for the private sector power generation companies except coal-based power plants. The initiative has been taken to attract investment in the power sector, officials said. The move came at a time when the power division decided not to undertake new power projects during its surplus production capacity.

As per a Statutory Regulatory Order (SRO) issued on January 9, the government is to give income tax exemption to private power generation companies under Section 44 of the Income Tax Ordinance 1984. According to gazette notification, under the existing policy the power plants would have to go for generation within December 2019. But, the revised notification extended the condition for start of commercial generation to December 2022.

“These companies will get income tax exemption on their earnings from power generation business from its commercial production date to December 31, 2034,” the source said. The power plants would enjoy full exemption from payment of income tax in the first five years of commercial operation, 50 percent in the sixth, seventh and eighth year and 25 per cent in the ninth and 10th year, they said.

The SRO said foreign employees at the companies will also enjoy income tax exemption for three years from the date of their arrival in Bangladesh. “Power generation companies will get exemption on foreign loans taken by the company. Tax exemption will also be given on the royalties and technical know-how fees received by any foreign collaborator, firm, company and expert,” official said.

The revenue board first offered the tax holiday benefits for the private power plants, except for coal-based ones, in 2013 on condition that they would begin commercial operation by December 31, 2014, and the 10 years’ tax exemption at reduced rates for plants who would begin commercial operation from January, 2015 and afterwards. Since then, the NBR has extended the deadline for the start of commercial operation several times.

Another SRO issued in July 2013 stated that companies which would enter into agreement for setting up coal-based power plants by June 30, 2020, would enjoy a number of tax incentives, including tax holiday for 15 years.

The Awami League government took initiative to increase power generation through private sector after coming in power in 2009 as the government enacted a special act to reduce severe power crisis in the country. At the same time, the government aimed to reduce dependency on private sector power generation.

The total power generation capacity of 137 public-private power plants is 19,000 megawatt (MW) in the country. Of them, 80 private power plants have generation capacity of 9,000 MW, according to power division official. Another 28 private power plant are under contraction and 12 plant are waiting for approval stage. Besides, 18 public sector power plants are under construction, whose generation capacity is 8,900 MW.