Union Budget 2012: Power sector’s wishlist
It used to be the darling of the Indian economy. But with tough times, the Indian power sector no longer electrifies investors. No wonder then that the industry’s Budget wishlist theme is a serious overhaul of policies, regulations and tax structures, CNBC-TV18’s Ronak Jain and Animesh Das report.
After a year of battling high coal prices, sporadic fuel availability, and hurdles from the green brigade, the Indian power industry is feeling powerless. And the industry says that without a strong power sector, any attempt to boost growth will be futile.
Ravi Uppal, president – power of L&T says, “The power sector, at this moment, is going through a phase of great anxiety. On the one hand, if we want our economy to grow at 8 to 9%, the power sector additional capacity must grow by 11 to 12% and that is not happening.”
Small wonder then that its wishlist to the Finance Minister incorporates a slew of measures including:
- The 5% duty on imported coal to be scrapped
- The tax holiday for power plants under section 80(I)(A) be extended
- Service tax exemption for infrastructure projects in the sector
- Removal of withholding tax on External Commercial Borrowings
The deteriorating health of state electricity boards is also a thorn in its side-one that needs immediate attention.
Uppal says, “One thing, which is very important and has been somewhat neglected in the recent years, is the distribution reforms because this is the root of many problems that we are facing today.”
Arvind Mahajan, partner – advisory of KPMG says, “We do need reform such that subsidies are given directly to the target segment rather than the state electricity boards doing a cross subsidy and not increasing tariffs and losses as per Shunglu report rising to nearly Rs 75,000 crore in the current year.”
It also wants the government to come up with more fund-raising avenues that will help revive stalled projects, and start new ones.
Uppal says, “The government must create a special vehicle under which funds can be made available to power sector and at a cost that they can afford. This is something that was talked about some years ago, but has not been implemented. I think the need for this is more than ever before.”
Experts say the power sector is in pause mode right now. But unless the government takes some serious steps quickly, the economy will take a much bigger hit in days to come. And if that happens, the government may well have to kiss its dreams of 8% plus growth goodbye.