In another key change it has been decided that the Central Excise Department's machinery will be employed to collect levy from the generation companies (run by state and Centre) across the country. Since the earlier plan was to levy the cess on power consumed, the Hydel Policy had envisaged that the State Electricity Boards would be responsible for collection of the cess. Small and mini generation units are likely to be exempted from the cess, while there is no decision yet on levying a cess on captive power plants.

The policy had given an indicative figure of ten paise per unit ofpower consumed. The Ministry had calculated that the about Rs 3000 crore could be raised per annum by levying a cess of 10 paise. But the final figure would probably be different as this decision has political implications.

While the NPDF will be the collecting pool for the money raised from the cess, each state will also set up its own Power Development Fund. The money raised from the cess will be distributed between NPDF and the state funds. While the Policy had suggested that the two thirds of the money raised from the states will be given back to the state fund, official sources say that the final equation was still under preparation.

This is because of the change in the levy system. Since the levy will be on generation, some states/UTs which do not have any generation capacity will lose out. Under the new system even these states will be given some funds from the NPDF for power development activities which will include transmission and distribution.

Interestingly, the earlier drafts of the hydelpolicy had toyed with the idea of levying the cess at generation level. The wheel has come full circle now. The logistics and high administrative cost of levying a cess on power at the consumer level made the Government change its mind.