BOI eyes perks for projects that address power shortage

The government may grant tax perks to companies that help ease the country’s power supply shortage, an official of the Board of Investments (BoI) said on Friday. The new measures will be included in the government’s 2010 investment priority plan, which is scheduled for Cabinet discussion on Tuesday, BoI Managing Head Elmer C. Hernandez said. This came as the power shortage in the Visayas and Mindanao remained critical last week, with hydroelectric plants running under capacity due to low water levels and several plants still closed. Consumers in Luzon recently had to deal with rotating brownouts, but the supply lack has somewhat eased with supply restored to several natural gas plants. As a stopgap measure, the BoI may offer new tax perks to businesses that address the power shortage, particularly in Mindanao, Hernandez said. The draft investment priority plan presented to the public last month added a provision giving companies income tax holidays for taking on projects that "prevent or address impacts of calamities and disasters." Two storms that flooded parts of Luzon late last year were the original reasons for the provision. "But isn’t this power shortage a crisis too? Hasn’t Mindanao already been declared under a state of calamity?" Hernandez told reporters in Filipino a day after attending an interagency meeting on resolving the power supply gap. "It was taken up and I said yes, [solutions to the power shortage] can qualify in the [investment priority plan]." For instance, Mindanao-based firms may be allowed to import generator sets tax-free, he said. The plan, in line with the Omnibus Investments Code, exempts eligible business activities from paying Customs duties and national taxes on imported equipment. This tax perk should encourage companies to ease the load on the power grid by disconnecting from the system and using generators to generate electricity, allowing electric cooperatives to serve residential power users instead, Hernandez said. A similar measure was enforced during the power crisis of the early 1990s, he added, when a blanket elimination of taxes on imported generator sets was imposed. The BoI may also include power plant rehabilitation among the power generation projects qualified for incentives, Hernandez said. The tax perks will come on top of the usual incentives granted to new power generation projects. "Our proposal is to allow the rehabilitation of existing power plants at least to bring them back to their optimum capacities to address the power shortage," Hernandez said, saying a number of old power plants could take advantage of this tax perk. Plant rehabilitation was not included in last year’s investment priority plan and only projects that used renewable energy sources, adopt environmentally friendly technologies, and locate in remote areas were covered. Sought for comment, the Philippine Chamber of Commerce and Industry (PCCI) said a solution to the power shortage must also keep in mind the budget deficit, which the government wants to limit to P293 billion this year. The shortfall hit a record P298.5 billion last year as the economic downturn limited state earnings. "[The] government must meet its tax goals. The Trade and Finance departments and business groups could sit down to come up with a win-win solution," PCCI President Francis C. Chua said in a telephone interview on Sunday. Government loans may also be needed on top of tax exemptions to entice firms to purchase generator sets, Chua added. "And for the long-term it is the job of the government to provide the necessary [power supply]," he said.