The power producers, who are already reeling under fuel and liquidity crunch, have urged the Union Finance Minister P Chidambaram to extend the tax holiday available to power projects by another five years from the date of generation.

At present, under Section 80-IA of the Income Tax Act, an undertaking is eligible for a tax holiday only if it begins to generate power by March 31. Though there are nearly 8,500 mw gas-based capacity is ready, but the plants are unable to operate due to lack of fuel.

In the 12th Five Year Plan, more than 88,000 mw capacity is envisaged. And more than 50 per cent of this would come from the private sector. The tax holiday is essential to boost investments that have dried up in the past two years, said sources concerned from the industry.

There is an immediate need to augment electricity generation capacity in the country. Industry has to invest large capital in setting up of power plants to ensure uninterrupted power supply. This sunset clause under Section 80-IA for power plants needs to be amended to extend the tax holiday for another five years, industry body FICCI said in its Pre-Budget Memorandum 2013-14.