Amid indications that the forthcoming Budget will essentially cater to the wish list of the common man (read the vote bank), power sector is one of the few sectors buzzing with optimism that it will also be a ?power-packed Budget?.
Power, being an important input to various industries, impacts the overall growth of the economy in the country. Adequate availability of resources is one of the prime concerns the power sector is facing today. Indications are that finance minister P Chidambaram would announce steps to mitigate the shortage of funds for the sector. On the expectations radar are announcements on easing of the ECB norms, sops to facilitate foreign capital besides including power sector funding under priority lending by banks.
Alongside, it is also expected that the finance minister will make an announcement on launching a new electricity fund with a corpus of Rs 1 lakh crore, catering to the requirement of the power sector.
The government has targeted a power generation capacity of over 1 lakh mega watt by the end of the 11th Five Year Plan, which is the highest so far and is more than the capacity addition achieved in the 8th, 9th and the 10th Plans put together. Of this, around 10,000 mw each will come by way of captive and renewable sources like wind and solar energy. The funds requirement for achieving a capacity addition of this scale along with associated transmission and distribution networks is estimated at over 10 lakh crore.
Inclusion of power in the priority sector lending programme of banks alone is expected to unlock over Rs 2 lakh crore for the sector.
State-owned firms like Power Finance Corporation (PFC) and Rural Electrification Corporation (REC), too can expect sops that will help them raise cheap funds from abroad. Rural electrification is a priority area for the government and the finance minister may announce tax benefits to the Rajiv Gandhi Gramin Vidyutikaran Yojna (RGGVY)?, a major project being carried out in rural areas.
According to A K Srivastava , managing director, Essar Power Ltd, the Budget should provide incentives for attracting investments in the sector. To list a few, Srivastava feels the finance minister should consider extending benefits under Section 80-I to Power Projects till the year 2015 considering the long gestation period required for setting up Power Projects. Also, he feels that Mega Power status to be granted to all Power Projects having the size of 500MW and plus. Moreover, Custom Duty on spare parts imports should be brought at par with Project import to reduce the cost of generation.
On the equipment manufacturing front, organisations such as the Indian Electrical & Electronics Manufacturers? Association (IEEMA), in its pre-Budget memorandum has asked for treating the power sector as a full-fledged infrastructure sector. Towards this, IEEMA has sought benefits under Section 80IA of the Income Tax Act in full to new power plants.