Budget 2016: Expectations from power sector

Article by Kuljit SinghThe Indian power sector today is in a state of flux. Over the very recent years, the country has warmed up to renewable energy and has almost begun to ignore the hitherto mainstays (thermal and hydro). Considering the country’s commitments on climate change and the inherent benefits of renewable energy (lower cost per MW, significant shorter gestation cycles), the focus should rightly continue on this space. We expect the fiscal incentives provided to the sector to continue to achieve the ambitious RE targets of 175 Gw by 2022. However, India needs to consistently add base load stations. Hence, the discussions on considering large hydro power as part of the Renewable sources is a welcome move. Taking this cue, the fiscal incentives available to wind and solar should be extended to large hydro also. Similarly, the focus cannot be taken away from the dwindling new investments being committed to in the thermal space. Apt encouragement to next generation, new technology thermal capacity plants and giving the necessary push to part completed projects that are stuck at the last mile is important. Given that several ready power projects are stranded due to either a missing transmission link or because the states are unable to buy the power, the other key leg for the government to focus on is the Transmission & Distribution segment. The government could consider granting infrastructure status to investments in the T&D sector to promote participation in the sector, in addition to continuation of the Service tax exemption that it presently enjoys.  Also, the UDAY scheme announced to revive the health of the discoms will need capital allocations. In addition to the above, policy decisions such as extension of 10-year tax holiday for Power Plants till March 2020 & removal of Electricity from the exempt category of goods under GST regime (to ensure rationalisation of various taxes that the sector faces) would ensure improvement in the business metrics for the entire sector as a whole.(The author is Partner in Transaction Advisory Services (TAS) at EY India. Srishti Ahuja Taneja and Jitesh Khatrani, senior TAS professionals, EY contributed to the article. Views expressed are personal)