THE POWER SECTOR HAS THREE things to cheer about and one issue to sulk over. A national fund for power transmission and distribution (T&D) , a coal regulator along with a coal distribution policy, and increased budget allocation for rural electrification are all likely to benefit the industry. But imposition of a 4% special countervailing duty on imports for power plants less than 1,000 MW is causing grief.
Finance minister P Chidambaram announced this new duty even as he was cutting duties on imports for other projects to 5% from 7.5%.
The industry, predictably, is crying foul, saying that the move increases their cost at a time when the country desperately needs investment in the sector.
Industry analysts said the proposed national fund for T&D would aim to bridge the huge investment gap in the sector. The proposal for a coal regulator spells relief for generation companies hit by rising fuel prices. This is one of the recommendations of the Hyderabad-based Administrative Staff College and the Shankar Committee on larger coal sector reforms, currently under consideration by the central government, said Union coal secretary HC Gupta.
Said Coal India chairman Partha S Bhattacharyya: “The regulator should also take care of the environmental and social sustainability issues in mining. Rural electrification will pick up pace, too. The FM has allocated Rs 5,500 crore in 2008-09 to light up 5,000 villages across the country, as part of the Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY). Villagers below poverty line can get free electricity connections under this scheme.
The new fund outlay will clearly accelerate the setting up of distribution and transmission backbones in many villages. Backof-the-envelope calculations suggest that it costs Rs 12-Rs15 lakh to set up a distribution backbone in a village. However, there is one proposal which is unlikely to cheer the power sector. The finance minister has amended service tax rules, which could adversely affect T&D turnkey contractors, says KEC International managing director and CEO Ramesh Chandak. “The service tax applicable on works contracts under the composition scheme for payment has been doubled to 4%. This will affect all engineering, procurement and construction (EPC) players in the industry,” he said.
NTPC, Tata Power, REL, PTC, PowerGrid, Rural Electrification Corporation
STORY SO FAR
India faces a huge power deficit. More than 1,00,000 MW need to be added over the next few years to sustain 8%-plus GDP growth. Govt has a crashplan to kick-start investment in generation. But more needs to be done
Private sector is keen, but bureaucratic and political hurdles remain