Budget analysis -2017

Budget disappoints power sector: expert

Dr. D. Shina

• The sidelining of the sector in the budget could lead to its disorientation at the very crucial stage of high expectations of growth.- Dr. D. Shina

Stakeholders are of the opinion that the failure on the part of Union Finance Minister Arun Jaitley to consider power sector as part of the infrastructure sector in the Union Budget presented last week will severely dampen the impressive growth initiated in the electricity installed capacity of the previous years.

Electricity finance expert D. Shina, who analysed the situation post-budget, said that while the budget gave a boost to the infrastructure sector, it had given a shock to the power industry.

The sidelining of the sector in the budget could lead to its disorientation at the very crucial stage of high expectations of growth.

‘No more sops’

“This is because the power industry pivoted around many sops. In fact, the ambitious steps taken by the government in the past years succeeded in eliminating the supply-demand gap to a considerable extent. But an abrupt end to these now can divert many investors from the scene thereby arresting the growth,” Dr. Shina said.

To add to the woes of the sector power, the cost can go up by a considerable amount due to various reasons. The budget said that the 80-IA tax holiday for the sector would be discontinued from April 2017, disappointing solar power developers and thermal power players who were expecting an extension of this clause, Said, Dr. Shina, a professor at Sree Narayana Guru College of Legal Studies, Kollam.

The Economic Survey was vocal on difficulties being faced by the private power generation sector. The industry had expected some relief in terms of corporate tax and minimum alternate tax (MAT). But there was no such mention in the budget speech. The lack of major provisions for hydro or nuclear energy was also glaring.

Rural electrification

A positive attempt in the budget was to maintain focus on rural electrification. The Finance Minister was confident of meeting the country’s ambitious 100% rural electrification target by May 2018 and he allocated a sum of Rs. 4,814 crore to its flagship scheme Deen Dayal Upadhyaya Gram Jyoti Yojana.

This was sure to brighten up rural India, but it was not clear how its increased energy demand could be met without ensuring a matching growth in the generation sector, Dr. Shina said.

Source; The Hindu dated 06/02/2017