Innovative funding needed for power sector

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Published: March 1, 2015 2:40:28 AM

Since this plug-and-play model would be replicated in other infrastructure investments, it would be good to learn the new approach to bidding and awards

the finance minister has rightfully focused on policy and taxation reforms to provide much-needed impetus to strengthening of the economy. The Budget has strongly indicated the government’s desire to move towards an annual growth of 8% to 8.5% this fiscal. It is a known aspect that commensurate power sector growth of 12-13% would be needed to support economy growth of levels indicated.

The Budget statement of the finance minister mentioned enhanced target of 175,000 MW for renewable energy by 2020, as also five new Ultra Mega projects on plug & play model, which will have a capital outlay of R100,000 crore. Since this plug-and-play model would, thereafter, be replicated in other infra investments, it would be good to learn the new approach to bidding and awards.

The minister also announced to ease the approval process for infra projects by launching e-Biz Portal that would help to integrate regulatory permissions at one source. He also proposed to set up regulatory process of permissions than seeking clearances, so that work can commence on investments without holding up for permissions. These initiative will ease and accelerate the growth and setting up of projects. Also, FM announced setting up of ‘Public Contracts Resolution of Disputes’ Bill, a mechanism for resolving stranded contracts under PPP. This is a welcome step and hopefully would help unlock tremendous equity and debt trapped in infra projects.

The announcement of implementation of GST from April 1, 2016, is a welcome move. This will help reduce multiple taxation and also in simplification of the tax process in India, thus bringing more investments. For tax efficiency, the power sector should be included in the GST ambit so that it can claim credit for the GST applicable on capital goods, raw materials, feed stock, and other inputs acquired for production and distribution of its outputs.

We also look forward for innovative financing schemes for power sector like financing through new energy funds, energy bonds and longer duration infra loans.

By Anil Sardana, CEO & MD, Tata Power

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