Tax fraud through power theft unearthed
28 Oct 2004
Tax fraud through power theft unearthed
By G. Anand
THIRUVANANTHAPURAM, OCT. 30. The Directorate of Central Excise Intelligence (DCEI) has found that several industrial units in Palakkad showed low power consumption and lower levels of production in order to evade Central Excise duty and Sales Tax.
A senior DCEI official said several instances of "power-theft-for-tax-fraud" by some electricity-intensive units that smelt scrap to make steel ingots have been brought to the notice of the Kerala State Electricity Board (KSEB) Vigilance.
According to KSEB Vigilance Department sources, the 70 scrap iron smelting units in the Kanjikode industrial belt alone consumed more than Rs. 5 crores (50 MW) worth of power a month. "This is almost the installed capacity of the Kakkadu power project," an official said.
Low meter reading
The KSEB Vigilance Department got the first indication of the "continuing power theft" recently when it analysed the electricity meter data of as many as 62 smelting units. A 20 per cent fall in power consumption was noticed between 10 p.m. and 6 a.m. when industrial production was usually stepped up to make the most of the low power tariff at night. An official said the study indicated that many of the units had installed devices to show low meter readings. "We have intelligence that the devices are activated during the peak production time at night," he said.
Despite evidence of large-scale power theft, the KSEB Vigilance Department had conducted only two "surprise" inspections in the industrial belt recently. In one instance, a smelting unit was found to have stolen power worth more than Rs. 10 lakhs. The Vigilance Department's recommendation to cut electricity to the unit is yet to be implemented. In the other instance, the department found that a transformer had been installed at a smelting unit without KSEB sanction.
Political interference
A KSEB official said many of the units "habitually" failed to pay power bills.. "However, we are not able to take penal action owing to pressure on senior engineers from politicians," he said. Till 2003, most of the units were drawing power at the "pre-1992" concessional rate of 50 paise per unit while the KSEB tariff for industries was Rs. 3 per unit. "Even today, some units continue to enjoy the concessional rate on the basis of court orders," he said. The heavy power load on the system caused by high electricity consumption by these units is damaging transformers and power lines in the area, an official said.
The DCEI, which raided some of the units, said at least 50 per cent of the steel ingots production was sold "unaccounted". Most of the units import iron scrap as raw material for making the ingots that find use in the construction industry. Excise duty is also evaded by reporting "high wastage" of imported scrap during smelting.
At the same time, the units buy local scrap to maintain an unaccounted stock of the raw material, he said.
The DCEI is also verifying reports that certain units had evaded Customs duty by importing costly machinery disguised as metal scrap and certain politicians in North Kerala indirectly owned some of these "errant" units.
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