• Essar’s plea for duty exemption rejected

    A day after the Supreme Court declined permission to Essar group promoter, Ravikant Ruia, to leave the country the company received a shock over electricity duty.

    On Wednesday the bench of Justice M R Shah and Justice A S Supehia in Gujarat high court dismissed an appeal filed by Essar Steel Ltd and Essar Power Ltd against a single-judge bench order holding the company liable to pay Rs1,038.27 crore towards electricity duty to the state government.

    Essar has been seeking electricity duty exemption for its power plant set up at Hazira for over two decades. But the government rejected its demand, as it sold power to other entities. The duty exemption was available only to captive power plants, the government maintained, and said Essar had not sought prior permission to set up the plant to meet the purpose of selling electricity.

    The state government had first refused Essar group’s claims for duty exemption on electricity in 2003, and asked it to pay more than Rs1,000 crore that was due.

    Essar group had then approached the high court. The court asked the company to make a representation to the government and decide the issue afresh. But in 2009, the government rejected Essar’s application, asking it to pay up Rs 1,038.27 crore.

    Essar group went to court again with the high court’s single-judge bench, in 2010, upholding the state government’s order. The group then appealed against the order, which was dismissed on Wednesday.

    The case history shows Essar Steel Ltd had sought permission and set up a 20 MW captive power plant at Hazira in 1990, and later upgraded its capacity to 30 MW. This captive plant was granted electricity duty exemption by the state government as per its policy, on both the occasions.

    The company later wanted to set up another captive power plant of 300 MW in Combined Cycle Mode and obtained due permission from the state government as well as the Centre.

    But with changes in electricity policy in the Centre in 1991-92, which allowed private participation in power generation, the group founded Essar Power Ltd to sell electricity to other entities.

    The company, however, continued to seek electricity duty exemption from the state government according to its scheme prevailing in the early 1990s.

    The government rejected Essar group’s claims in 2003 with the state energy department stating the company has been selling power to GEB, and therefore the benefit of a captive power company cannot be given to Essar. James Develin Jersey

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