March 2016

March 11, 2016 1:57 pm0 commentsViews: 411

PWI_march2016PowerWatch March 2016

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The budget for 2016-17 was an anti-climax for the power sector. People’s expectations from this budget were quite high since the economy is not in a good shape. Nationalised banks are struggling to come out of NPAs, Industrial output has declined, commodity prices are high and share market has dwindled. The power sector was expecting relief in this budget from the fi nance minister. The budget has given minor relief to the oil and gas sector but further increased pressure on the generation sector which is already reeling under tremendous uncertainty due to fuel and barely managing to survive in the current market. No innovative ideas were suggested in the budget and it was a routine aff air. It failed to give the required stimulus to the power sector and on the contrary doubled clean energy cess on coal in the second consecutive budget, thus increasing the power tariff . Hope that Ujwal Discom Assurance Yojana (UDAY) for state distribution companies and Export Promotion Capital Goods (EPCG) scheme for Indian manufacturers would improve morale of the power sector.

EPCG was introduced by the government in the early 1990s with an aim to allow exporters to import machinery and equipment at aff ordable prices to facilitate production of quality products for the export market. Under the Foreign Trade Policy, the scheme allows import of capital goods for production at zero customs duty on the condition that goods worth six times the duty saved be exported in six years. The domestic producers do not export much to comply with the obligation under the EPCG scheme. In the past few years, the domestic power equipment capacity was underutilised as cheap imports fl ooded the market in many areas. To support domestic manufacturing, the import of capital goods is now not permitted under EPCG Scheme for generation/transmission of power. This will benefi t multinational companies who have manufacturing units in India as well as Indian manufacturers.

Out of the seven states that have signed the UDAY scheme, Punjab with a debt of about Rs 20,000 crore is the recent state to join the scheme. The state government has promised to take over 75% of this debt for interest savings. Under the UDAY scheme, the state government will take over 75 per cent of the electricity distribution utilities’ debt and refi nance it through bonds. The remaining 25 per cent of the debt of distribution utilities are refi nanced through stategovernment backed discom bonds.

There is a need to boost morale of the power sector which is a basic infrastructure for industrial growth. No new investment is coming in this sector since the last few years and unless major initiatives are taken, industrial slowdown is evident as a result of power shortage.

Jayant D Kulkarni

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