Budget pumps energy into struggling power sector

Experts, industry and investors observe that the reeling power sector will find some respite, if the measures announced in the budget are implemented properly
 To meet its commitment of providing “24 x7 power to all homes”, the government has proposed many positive steps to boost the power sector. Presenting his maiden union budget, Finance Minister Arun Jaitley has proposed to allocate an initial sum of ` 100 crore for preparatory work for a new scheme “Ultra-Modern Super Critical Coal Based Thermal Power Technology” to promote cleaner and more efficient thermal power.
The Minister also announced comprehensive measures for enhancing domestic coal production with a stringent mechanism for quality control and environmental protection. “Measures will be initiated to provide adequate quantity of coal to power plants which are already commissioned or would be commissioned by March, 2015 to unlock dead investments,” he said.
In line with the government’s intent on promoting cleaner sources of energy, the ` 100 crore allocation for the adoption of cleaner thermal power technology is indeed a timely proposal. What would however made this budget a landmark for the power sector is the proposal to extend a tax holiday for 10 years to power generation and T&D firms who start operations before FY2017.
Minister of State (Independent Charge) for Power, Coal and New and Renewable energy, Piyush Goyal has welcomed the announcement on standardisation of custom duty on coal – across grades and types – to end disputes immediately. He said, “Our moves for improving coal quality by supplying crushed and washed coal, ensuring adequate coal supply for already commissioned and would-be commissioned power plants will unlock dead investments.”
Experts, industry and investors welcomed measures announced by Finance Minister for the power sector. They observed that the reeling power sector will find some respite, if the measures announced in the budget are implemented properly. Anil Chaudhry, Country President and Managing Director, Schneider Electric India said, “From ` 100 crore allocation for super critical ultra modern thermal power to the rationalisation of coal linkages will facilitate the struggling power producers and put the stranded power plants on a rebound course. The government’s promise to resolve the existing deadlocks in coal sector and provide fuel to all projects coming up before March 2015 will be a massive thrust to get the flailing sector on course to meet the Government’s 12th Plan target of 88,000 MW.”
According to Vineet Mittal, Founder President, Solar Power Developers Association (SPDA), “Proposed UMPPs in Rajasthan, Gujarat, Tamil Nadu and Ladakh in J&K with a budget of ` 500 crore is very encouraging. If the govt ensures issues of evacuation, land and availability of the water is taken care of – there will be a lot of players willing to enter this segment.”
G. Sathiamoorthy, Country Manager and MD, Black & Veatch Consulting said, “In line with the government’s intent on promoting cleaner sources of energy, the ` 100 crore allocation for the adoption of cleaner thermal power technology is indeed a timely proposal. What would however made this budget a landmark for the power sector is the proposal to extend a tax holiday for 10 years to power generation and T&D firms who start operations before FY2017.”
Seshagiri Rao, Jt MD & Group CFO, JSW Steel observes, “The 10 year tax holiday to the undertakings which begin generation, distribution and transmission of power by March 31, 2017 will bring stability in our policy and will help the investors to plan their investments better.”
Sanjay Kirloskar, Chairman and Managing Director, Kirloskar Brothers Ltd. opines, “I rate the interim budget 8 out of 10 and totally agree with the FM that our domestic manufacturing sector has been under stress and it requires a major boost. There are strategic areas where he has laid extra emphasis that will result in a huge fillip to the manufacturing sector. These areas range from more highways to airports, smart cities, scientific warehousing for agriculture produce, tax sops for new power companies, setting up new industrial clusters, textile clusters to earmarking ` 10,000 crore for start-ups, investment allowance at 15 opines for 3 years to small manufacturing companies.”
However, KVB Reddy, Executive Director, Essar Power feels, “Coal linkage rationalisation and provision of coal for standing projects and easier mining laws is key for reviving the sector  but steps on the ground more important.”
Investors’ paradise!Finance Minister has emphasised on need to revive growth in the manufacturing sector which is barometer for the economy and has announced various initiatives to encourage investment and employment. This time special effort is put on training, skill creation to ensure employability for the manufacturing sector. Achal Bakeri, Chairman and Managing Director, Symphony Ltd observes, “FM’s proposal of investment allowance of 15 per cent for 3 years to a company that invests more than ` 25 crore in any year in new plant and machinery will encourage new investment and help generate new employment opportunities.”
“The investment linked tax incentive is also a positive for manufacturing sector,” says Seshagiri Rao.According to Ved Prakash Mahendru, Chairman and Managing Director, Eon Electric, “Investment allowance of 15 per cent for 3 years for companies who are investing more than Rs. 25 crore in plants or through machineries is a big boost for indigenous manufacturers which will boost investment in indigenous industry to overcome cheap low cost imported products of all kinds including all kinds of consumables and LEDs etc. which are critically needed in the country to boost electric energy saving, the demand for which is growing all round the country for industrial development.”
Focus on renewableThe government has also laid stress on solar and wind energy, besides extending tax benefits for thermal power project developers. Terming the Union Budget 2014-15 as ‘transformative’, the power minister welcomed steps for incentivising solar powered water pumps, and setting up of solar parks Rajasthan, Tamil Nadu and Ladakh; and moves for setting up solar plants on banks of canals. “We will also set up Green Energy Corridors for evacuation of renewable energy,” Mr Goyal said.
Solar power equipment manufacturers feel that doing away with inverted duty structure will drive the competitiveness of local manufacturers and lower costs of solar power in India. Tulsi Tanti, CMD, Suzlon Group believes, “The budget proposal to increase clean energy cess from ` 50 per tonne to ` 100 per tonne for financing and promoting will indeed be a major boost for wind energy in particular.” 
He adds, “Investment allowance along with continuation of additional depreciation (Total -60 per cent) is also likely to benefit SMEs who would like to invest in the wind sector.”
“Rs.100 crore for the development of 1 MW solar parks on the banks of canals and ` 400 crore for setting up solar power driven pump sets are some unique measures introduced that will further drive utilization of solar energy and reduce our dependency on conventional energy resources,” Mr Chaudhry said.
According to Ranganath NK, Managing Director, Grundfos Pumps India “What came as a surprise is the ` 400 crore allocation for 1 lakh solar pumping systems. This I hope is the beginning of this great initiative in demand side management. There is intent to make things better for manufacturing which can create jobs.”
Strengthening gas infrastructureThe government’s proposal of grid expansion for increasing the usage of domestic and imported gas by setting up 15,000 km of additional pipeline to be developed through the PPP mode is being welcomed by the Indian Inc. However, Mr Sathiamoorthy considers, “The budget was quieter about incentivising the exploration and production of domestic gas that would be used as a feed stock for gas fired power plants that have been in a limbo for the last two years.”
According to K Ravichandran, Sr.VP, Co-head corporate sector ratings, ICRA Ltd. “Utilisation of existing and upcoming gas pipelines could vary with the availability of natural gas, which critically depends upon the faster review of domestic gas pricing along with resolution of NELP related issues.”
Smart moveLiving upto the BJP’s pre-poll manifesto, the Union Budget 2014 proposed an allocation of ` 7,060 crore in current financial year for developing 100 smart cities in the country.
“The Prime Minister has a vision of developing one hundred ‘smart cities as satellite towns of larger cities and by modernising the existing mid-sized cities,” Finance Minister presenting his maiden budget speech.
He adds, “With development reaching an increasingly large number of people, the pace of migration from the rural areas to the cities is increasing. The new cities should be developed to accommodate the burgeoning number of people. Otherwise, the existing cities would soon become unliveable.”
The development of 100 smart cities is expected to open up opportunities for electrical equipment manufacturing companies and all kind of consumables.
“Modernisation of the cities and the measures laid out for shaping the concept of smart cities is very good news and is considered critical to give the right message to the world of our internal growth and self reliance. It will open up opportunities for electrical equipment manufacturing companies and all kind of consumables,” Mr Mahendru said.
—————–I rate the interim budget 8 out of 10 and totally agree with the FM that our domestic manufacturing sector has been under stress and it requires a major boost.
Sanjay Kirloskar, Chairman and MD, Kirloskar Brothers Ltd.—————-
—————–The investment linked tax incentive is (also) a positive for manufacturing sector
Seshagiri Rao, Jt MD & Group CFO, JSW Steel——————
—————Proposed UMPPs in Rajasthan, Gujarat, Tamil Nadu and Ladakh in J&K with a budget of ` 500 crore is very encouraging.
Vineet Mittal, Founder President, SPDA————-
————The government’s promise to resolve the existing deadlocks in coal sector and provide fuel to all projects coming up before March 2015 will be a massive thrust
Anil Chaudhry, Country President and MD, Schneider Electric India

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