Economic Issue #1

No double incentives for power projects

By Czeriza Valencia 

MANILA, Philippines - Under the 2012 Investment Priorities Plan, which will be released this month, power projects that are already granted a guarantee of rate return by the Energy Regulatory Commission will no longer be granted income tax holiday by the Board of Investments (BOI) to prevent “double dipping” of incentives.

 “The power sector is an important sector. It’s an industry that we want to have more capacity because we still lack low power cost . But there should be no double-dipping of incentives. If you already get a guaranteed rate from the ERC then you have already gotten your targeted rate. Then you should no longer be entitled to an income tax holiday,” said Trade Secretary Gregory Domingo.

Domingo said the implementing rules and regulations of the 2012 IPP would contain the guidelines in providing incentives to the power sector.

In the 2011 IPP, the following industries have been identified as priority areas: agriculture/agribusiness and fishery; creative industries; shipbuilding, mass housing; infrastructure; Public-Private Partnership projects; research and development; green projects; motor vehicles; strategic projects, and disaster prevention, mitigation and recovery projects.

Incentives for renewable energy investments were retained in the mandatory list.

Business sectors listed in the IPP are entitled to tax and fiscal incentives, particularly income tax holidays. Projects are approved based on net value added, job generation capacity and multiplier effect.

http://www.philstar.com/Article.aspx?publicationSubCategoryId=66&articleId=798319

Realization:
Without double incentives to power companies, there will be a lack of power supply because power companies have no other income to produce more power for its society than its own supply. Power companies will not be motivated to find and produce more power for the people and they will only stick on their current situation and still, there is a lower chance for improvement for power supply in the designated place their assigned with. This will affect greatly to the community towards economic growth. There will be slower production of labor and underutilized equipments that will happen due to limited power supply. People will be affected on their daily lives because of the economic issue.