Tax concessions for construction of large power plants in India has been extended to embrace smaller projects. The government originally proposed the concessions for projects with capacities of 1500 MWe and above. However it has now approved a plan to extend the concessions to thermal projects of 1000 MWe and above and to hydropower projects with capacities of 500 MWe or more.

The incentives include exemption from customs duty on imported capital goods and a tax holiday of 10 years. State governments have been advised not to levy local taxes to keep power tariffs down.