Power T&D sector needs service tax relief in Budget: KEC MD

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Power T&D sector needs service tax relief in Budget: KEC MD

Indian Power sector is in crises. It is not only a sectoral challenge but now has become a national challenge. The Shunglu Committee has said that Discom (distribution companies) losses are over Rs 100,000 crore and largely funded by the banks, so even the banks will have an issue.

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By Ramesh Chandak

Indian Power sector is in crises. It is not only a sectoral challenge but now has become a national challenge. The Shunglu Committee has said that Discom (distribution companies) losses are over Rs 100,000 crore and largely funded by the banks, so even the banks will have an issue.

Most of us are discussing about generation and coal availability. But even the more serious problem is of under investment in the transmission and distribution (T&D) sector. The transmission lines are loaded 90% as against the world standard of 60-65%.

The investment in distribution should be equal to generation, but the actual effective investment is only half of it for the last 50 years. The T&D sector requires significant new investment in systems and hardware.

Some of the countries which have done very good work in this direction for the last 7-8 years are Argentina, Chile and Peru.

Today one of the major issues in the T&D industry is the Right of Way. Most of the projects are getting delayed because of that, which are increasing the cost of execution.

Indian Electrical equipment sector was steadily growing on 13-14% but today the industry growth is only at 4.4%. Capacities are under-utilized whereas the imports of electrical equipments are growing at 20%. 14% price preference for T&D equipments is a must, without which the industry will suffer heavily.

We are expecting the government to consider either a strategy for price preference or levying a custom duty or special additional duty to protect generation and also the T&D industry. 

Similarly there is a lot of confusion regarding payment of interest on excise duty today on differential price based on price variation formula. Since the indexes for price variation come late, we request the government to change the payment of duty under sub rule 4 of Rule 7 of Central Excise rules 2002, to be modified that excise duty on price variation should be payable under the month it is determined, instead in the month for which it is determined.

There are also inverted duty structures for insulators and some other equipments, that should also get corrected.

Other important point, on which the industry would like to have a relief in the budget, is the service tax exemption, similar to road, airport, railways, bridges and tunnels. There is no reason T&D is not considered as the infrastructure industry.

Under T&D industry, the construction equipments get outdated very fast since they also work in the open areas, therefore we have requested the government to increase the progress rate from 15% to 30%.

Also T&D industry has to sometimes take up jobs in very difficult locations, like NE, Jammu & Kashmir, Afghanistan, where some special exemptions or deductions should be given.

The writer is MD and CEO at  KEC International