This Budget augurs well for power producers

Budget 2013-14 has covered some aspects of power and infrastructure sector. I am happy that the policy advocacy by the Minister of State for Power Jyotiraditya Scindia last year has been further intensified through the Budget proposals of finance minister P Chidambaram.

The financial woes of power distribution companies have been hitting the power sector for long and the government has announced guidelines regarding financial restructuring of state power distribution companies. Further,the state governments have been urged to prepare the financial restructuring plan and quickly sign MoUs and take advantage of the scheme.

This is a good beginning to put the finances of the state electricity boards in proper shape but this will need strong political will from the concerned state governments as also the Centre for getting the tasks done. The minister of state for power is taking all steps to take the states on board and almost all the states are agreeable to reforms.

Similarly,to ensure coal availability to the power plants,the Budget has talked of taking concrete steps to reduce dependence on imported coal,which is quite costly for the power producers. Chidambaram has mentioned of devising a PPP policy framework with Coal India Limited as one of the partners. This will have to be worked out by CIL and it will take time. Till then,urgent steps are needed to ramp up the domestic production of coal and CIL has to take the major responsibility of this task in the interest of generation.

The extension of 80-IA for one more year is welcome as this will encourage setting up of new capacity in the power sector. The deduction of withholding tax from 20 per cent to 5 per cent has again featured under Section 194 LC but we expected a clarification on Section 206 A wherein this exemption is allowed to those who do not have an Indian PAN card. Hopefully,this will be clarified and the exemption will be available.

Introduction of 2 per cent customs duty and increase of countervailing duty from 1 per cent to 2 per cent will have an impact on the price of imported coal and on the cost of power generation and is expected to increase the tariff. This,along with the freight increase announced in the Railway Budget,may increase the cost of power by over 5 paise per unit as far as NTPC is concerned.

The investment allowance announced,of 15 per cent over Rs 100 crore for manufacturing companies,may have an indirect impact on reducing the cost of power equipment,which will be worked out when the details are available.

Increase in surcharge on dividend distribution tax from 5 per cent to 10 per cent and increase in surcharge on corporate tax from 5 per cent to 10 per cent for companies having taxable income of more than Rs 10 crore will impact the financials.

The development of the power sector is an integral part of the growth of the national economy and that way,I am happy that Budget 2013-14 proposals have the potential to impart optimism in the future of the Indian economy with the adoption of a few measures which are attractive for foreign and domestic investors. The Budget has talked of earmarking $1 trillion in infrastructure in the 12th Plan and the success of this programme is the key to the emergence of a new India.

The new policy in the oil and gas sector by moving from profit sharing to revenue sharing as also the reviewing of the natural gas policy are certainly welcome steps and the entire package for the core sector of the economy,have to be implemented in totality.