Bouquet of sops, 10-year tax holiday extended for power projects

Plan to replicate Gujarat’s 24x7 power supply model by segregating distribution infrastructure.

By: ENS Economic Bureau | New Delhi | Published: July 11, 2014 1:34 am

For the power and renewable energy sectors, the Union Budget has provided a bevy of sops to rekindle the investment sentiment, including a much sought-after extension to a 10-year tax holiday for developers of power projects. Finance minister Arun Jaitley also announced a new scheme “Ultra-Modern Super Critical Coal Based Thermal Power Technology”, under which thermal power projects deploying highly efficient super-critical boiler technology would be awarded through competitive bidding to developers. An allocation of an initial sum of Rs 100 crore for preparatory work for the scheme has been announced in the Budget.

The provision of the tax holiday being extended for power companies comes at a time when the interest in the generation sector has been waning. The announcement had ensured a sharp surge in shares of India’s power generation companies, with Tata Power Co Ltd and Adani Power ending up over 3 per cent on the BSE, Jindal Steel and Power up 1.6 per cent and NTPC Ltd up 0.33 per cent.

“Instead of annual extensions, I propose to extend the 10-year tax holiday to the undertakings which begin generation, distribution and transmission of power by March 31, 2017,” Jaitley said in his maiden Budget speech. This stability in policy will help the investors to plan their investments better, he added. These amendments proposed on the extension of the tax holiday will take effect from April 1, 2015 and, accordingly, apply in relation to the assessment year 2015-16 and subsequent assessment years.

Alongside the new thermal projects, Jaitley also proposed to take up Ultra Mega Solar Power Projects in Rajasthan, Gujarat, Tamil Nadu, and Ladakh in J&K, for which a sum of Rs 500 crore has been set aside. A scheme for solar power driven agricultural pump sets and water pumping stations for energizing one lakh pumps has been announced, for which a sum of Rs 400 crores has been provided. An additional Rs 100 crore has been set aside for the development of 1 MW Solar Parks on the banks of canals.

He also announced a nation-wide plan to replicate Gujarat’s model of 24×7 power supply by segregating distribution infrastructure, especially feeders, for agriculture and non-agriculture consumers. The government announced Rs 500 crore support for his plan to replicate Gujarat’s model of 24×7 power supply by segregating infrastructure for agriculture and non-agriculture consumers. Jaitley said in his speech: “Deen Dayal Upadhyaya Gram Jyoti Yojana for feeder separation will be launched to augment power supply to the rural areas and for strengthening sub-transmission and distribution systems and a sum of Rs 500 crore for this purpose will be given by the government… Power is a vital input for economic growth and we are committed to providing 24×7 uninterrupted power supply to all homes.”

Gujarat’s Jyotigram Yojana currently make available 24 hours three-phase electricity supply to rural areas where the feeders have specially designed transformers to supply power to farmers residing in scattered farm houses. Jaitley said that the National Capital Territory of Delhi is plagued by frequent transmission related problems and issues of water distribution and supply. “In order to overcome this and make Delhi a world class city, I propose to provide Rs 200 crore for power reforms and Rs 500 crore for water reforms,” he said.

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