Budget Buzz

• Govt may introduce transparency in subsidies and give the sector a commercial status.

• Elimination of customs duty on import of fuels for power generation and other such levies that increase tariff. Uniform tax structure in the country to remove regional imbalances.

• Exempt power sector companies from MAT, at least during the tax-holiday period. Give mega power status to thermal projects of at least 500 MW capacity and hydel projects of 250 MW capacities, the tariff of these projects can be considerably reduced.

BUDGET RECAP 2004

• Tax benefit under Section 80 IA extended to power sector projects undertaken between April 1, 2004, to March 31, 2006.

• Six power projects brought to financial closure in 2003, with another 10 projects listed to reach financial closure.

• Extented equity support of around Rs 14,200 crore and loans worth Rs 2,100 crore to central public sector enterprises, including power.

WHAT I DON’TEXPECT IN BUDGET 2005

• “The government’s commitment on attracting new players in the sector must be manifested not just through intent, but must be facilitated through action. Increase the allocation to the power sector and ensure returns through anti-theft legislation.”
Firdose Vandrevala, MD, Tata Power

• “Enabling reform for competition in power sector has been provided in the Electricity Act, 2003. No major policy level changes are expected.”
Amod Khanorkar, head,infrastructure sector ratings, CRISIL

PERFORMANCE SNAPSHOT

Although state utilities in AP, Gujarat, TN, UP and Maharashtra are showing improvement in operational and financial performances, the states are yet to bring reforms by signing MoUs with GoI. The enactment of the Electricity Bill is expected to include a market base and competitive regime in the sector. The CERC directed that all new projects should be structured through a tariff-based competitive bidding process. The $3 billion Dabhol power project is yet to be restarted