RERC Regulations 21अध्याय III · Financial principles for computing costs and return

धारा 21 · Return on Equity

(1)

Return on equity shall be computed in rupee terms, on the equity base determined in accordance with regulation 17.

(2)

Return on equity shall be computed on pre-tax basis at the base rate of 15.5% for conventional generating stations and transmission licensee, and 16% for distribution licensee and renewable energy generating stations, to be grossed up as per sub-regulation (3) of this regulation:

(3)

The rate of return on equity shall be computed by grossing up the base rate with the normal tax rate for the year 2008-09 applicable to the concerned conventional generating station, transmission licensee, distribution licensee, as the case may be:Provided that return on equity with respect to the actual tax rate applicable to the concerned conventional generating station, transmission licensee, distribution licensee, as the case may be, in line with the provisions of the relevant Finance Acts of the respective year during the tariff period shall be trued up for each year of the Control period during the Annual Performance Review.

(4)

In case of renewable energy generating stations, the rate of return on equity shall be computed by grossing up the base rate with the tax rate equivalent to Minimum Alternative Tax (MAT) for first 10 years from COD and normal tax rate for remaining years of project life.

(5)

Rate of return on equity shall be rounded off to three decimal points and be computed as per the formula given below:Rate of pre-tax return on equity = Base rate / (1-t)Where t is the applicable tax rate in accordance with clause (3) of this regulation.Illustration: - i. In case of the generating company or the transmission licensee paying Minimum Alternate Tax (MAT) @ 11.33% including surcharge and cess:Rate of return on equity = 15.50/ (1-0.1133) = 17.481%ii. In case of generating company or the transmission licensee paying normal corporate tax @ 33.99% including surcharge and cess:Rate of return on equity = 15.50/ (1-0.3399) = 23.481%

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