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Finance Minister assures growth momentum to power sector

According to reports, finance minister P Chidambaram has not only acknowledged the problems faced by the power industry largely due to fuel constraints and the financial condition of distribution utilities, but has also proposed fresh incentives for the sector’s growth.
Chidambaram has announced PPP in the coal sector for higher production, and asserted that coal pooling would be a reality soon. He also extended Section 80-IA of the Income Tax Act pertaining to new investments in the sector and emphasised on debt restructuring for distribution companies. He reintroduced generation-based incentives for wind energy projects and made an allocation of Rs 800 crore to the Ministry of Non-renewable Energy for the purpose.

These proposals come at a time when states and the private sector are repeatedly arguing that the availability of adequate coal is key for sustaining power supply, especially given the accelerated capacity addition in a sector dominated by thermal power. Moreover, the government, in September last year, approved restructuring of Rs 1.9 lakh crore (till March 2011) debt of State Electricity Boards. Under the scheme, 50 per cent of the short-term outstanding liabilities would be taken over by the state governments. Balance 50 per cent loans would be restructured by providing moratorium on principle and best possible terms for repayment. Chidambaram asked states to quickly prepare the financial restructuring plans, sign the MOU, and take advantage of the scheme.

Sunil Wadhwa, CEO, IL&FS Energy Services Company Ltd and Co-chair, Ficci, Power Committee in his reaction said, “While Ficci welcomes the extension provided to Power Sector for a period of one year till March 31, 2014 under section 80 (I) A, it hopes that the same benefit may be extended till the end of the XII Plan as the private sector is envaisaged to add a little more than 50% of the installed capacity in the plan period.”

Further, Hemal Zobalia, Partner-tax, KPMG India, observed that Budget 2013 is poised to push Infra growth by introducing energy reforms in terms of promoting shale gas, clearing NELP blocks, PPP with Coal India, restoring GBI and restructuring discoms.

Sabyasachi Majumdar, Sr VP, and Co-Head, Corporate sector ratings, Icra Ltd said that a PPP policy framework in partnership with Coal India Ltd is being proposed to encourage investments in coal mining, which is crucial given that shortage of domestic coal has impacted generation performance of domestic thermal power plants. “Reintroduction of generation based incentives (GBIs) is likely to encourage IPP (independent power producer) investment in wind energy sector while a scheme is being proposed  for encouraging investments by municipalities through PPP mode in waste to energy generation projects,” he noted.

Wind power generators have welcomed Chidambaram’s sops. “I am confident that the industry would bounce back by 2014-15 and may be able to cross the set target of 5,000 Mw capacity every year,” said Ramesh Kymal, Chairman, Indian Wind Turbine Manufacturers’ Association (IWTMA).

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