Financial Daily from THE HINDU group of publications
Friday, Jul 09, 2004

News
Features
Stocks
Cross Currency
Shipping
Archives
Google

Group Sites

Industry & Economy - Budget


Nothing much to glow about

ALL those who expected the Budget to address power sector reforms came away disappointed. There were no announcements for the power sector, except extension of tax benefits under Section 80IA for renovation and modernisation of transmission and distribution systems.

"If I look at it as a common man, given the time Mr Chidambaram had to prepare the Budget, he has done a splendid job. But looking at it from the power sector's perspective, not much has been done to help reduce the cost of power," said Mr Firdose Vandrevala, Managing Director, Tata Power Company.

The sector had expected customs duty cuts and a nod for floating infrastructure bonds to raise finances.

But most importantly, the government was expected to grant mega power project status to projects of up to 500-MW capacity. The Budget has not addressed any of these.

Said Mr A.K. Srivastava, Managing Director, Essar Power: "It was expected that the Budget would extend `mega power project' status to units up to 500-MW capacity.

We also expected reduction in customs duty on power plant spares to help power plants cut maintenance costs. The Budget is silent on this and is hence disappointing. We hope the government will take care of this in the next Budget, to be presented a few months from now."

According to Mr Vandrevala, however, extending tax benefits for modernisation of transmission and distribution is an important step. "The Finance Minister has taken measures to ensure reliability of power and these are more significant than they appear. Extending Section 80IA tax benefits up to March 2006 will help utilities save money, which in turn will cut per unit costs," he said.

Mr Sanjiv Goenka, Vice-Chairman of the RPG Group and Vice-Chairman of the group's flagship CESC Ltd, pointed out that there were incentives for distribution and transmission, which he felt would help the entire power sector.

Sources in central PSUs said very few PSUs in either the central sector, including those administered by the Union Power Ministry, get equity support from the government and the announcement on equity infusion of Rs 14,194 crore to various PSUs (including power sector ones) will bring little cheer.

"The loan support promise of Rs 2,132 crore too will not gladden many hearts in the power sector as the rates are prohibitive," they said.

Analysis

THE only favourable mention that the Budget has for the energy sector comes in the form of benefit under Section 80IA of the Income-Tax Act for companies engaged in the business of erecting/installing transmission and distribution lines.

The said section allows full deduction of profits made by such companies from renovation and modernisation of existing transmission and distribution lines.

This will benefit companies such as Kalpataru Power Transmission and Jyoti Structures that are in the business of erecting transmission and distribution lines and towers.

The power industry has reason to be disappointed with the Budget as there are no proposals to promote investment in new-generation projects.

The industry had been awaiting re-classification of mega power projects to include projects with 500-MW capacity. This would have entitled companies promoting such projects to several fiscal incentives.

There is, of course, a general statement of intent to the effect that the government plans "major investment" in public sector units belonging to the power sector, among others. If such investment materialises, this would translate into business for those into manufacture and supply of generation, transmission and distribution equipment.

Raghuvir Srinivasan

More Stories on : Budget | Power

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page



Stories in this Section
More bank finance for stock brokers


`Budget is not inflationary' — Transaction tax no impediment to stock market activities
Chidambaram plays the popular tune — Tax breaks for farm sector and lower middle class
Thumbs down by markets
Service tax on transport intermediaries hailed
Adopting the Keynesian route
FDI push on telecom
Shipping industry says `ahoy!'
Mutual funds — Odds stacked against debt funds
Tonnage tax at last for a smooth sailing
Focus on rural housing; tax rebates to stay
Banking on industrial growth
IIG to beef up infrastructure
ONGC, GAIL to carry the can
A rural slant
Power on `line
Govt to facilitate crop diversification
A bitter pill, says pharma sector
Chaos after the wait
At your service, tax!
A progressive budget
Striking a balance
Spurring investments
Continuance of economic reforms
Catch My Point!
Mixed response from India Inc
Move to drop Cenvat may pep up yarn market
'Market pessimism to end soon'
Steps initiated to integrate stock, commodity markets
FDI in aviation capped at 49% — Buying of aircraft to attract tax
Toyota to set up R&D centre in India
0.15 per cent tax to be levied on securities transactions
SPV for Sethusamudram canal project
Insurance FDI limit raised to 49 pc
IDBI gets Rs 9,000 cr to turn zero NPA
In coalition company
Captains of industry give Budget proposals a cautious welcome
Shifting gears
Turnover tax may spook capital gains
RBI sees no Budget trigger for change in rate, inflation outlook
Views from the bottom of a coffee cup
Customs duty cut on metals: Major price impact unlikely
Coop sugar sector needs tax holiday
Water bodies renovation innovative
Transaction tax a dampener: FISE
Modest hike in Central Plan outlays in real terms
Nothing much to glow about
Smooth ride for tractors
Impact
No excise duty on dairy machinery
The jam in the Budget
Disinvestment, reborn
Disappointing delivery
Little to build on
Right thrust on crop diversification
Oil and gas — Slickly left alone
3 key areas targeted for 24.6% revenue mop-up
Industry divided on price drop
A taxing scenario for media
Personal finance: Thrust to direct equity investing
A cess to educate
`Back-to-basics' theme
A `neutral-to-negative' exercise: MFs
A mixed bag
Little more buoyant now
Prices static? Not for long
FDI limit hike has insurers smiling — Service tax on risk premium for life cover is a dampener
`More clarity on turnover tax needed'
Sewing up the competition
A lot to cheer about
Turnover tax seen as a blip
Rural sops to get FMCGs going
May impact trading volume: market players
`VAT by 2005, a step in right direction'
Your dream car to become dearer
A limited first step
Consolidation vital
Slip into khadi and morph into a geek
Hindujas interested in desalination project proposal
Budget fails to impress CETMA
`Bold decisions taken on foreign investments'
No impact on gold market; platinum prices may fall
THE THRUST AREAS
FIPB to fly with clipped wings
Cap for SSI loans raised to Rs 1 cr
A bitter-sweet pill for vegoil sector
Assurance to States on VAT compensation
Service tax hiked to 10 pc; list expanded
An effort to reflect mandate for change
New deal for farmers; more funds for States
Stress on moderation, stability in tax rates
Textiles woven in style
More services annexed at a higher rate
VAT full of promises
Watch out as the government shifts gears and piggybacks
No luck if you cross a `lakh'
Tax admin: Reforms kept in arrears
`No clear theme in the Budget' — Mr Yashwant Sinha, former Finance Minister



The Hindu Group: Home | About Us | Copyright | Archives | Contacts | Subscription
Group Sites: The Hindu | Business Line | Sportstar | Frontline | The Hindu eBooks | The Hindu Images | Home |

Copyright 2004, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line