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More coal blocks for power sector

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Powering growth
Electricity to 40,000 villages to be provided in 2006-07.
The total outlay for the Rajiv Gandhi Grameen Vidyutikaran Yojna has been fixed at Rs 3,000 crore in 2006-07.
Excise duty on compact fluore scent lamps cut from 16 per cent to 8 per cent.

New Delhi , Feb. 28

The Finance Minister, Mr P. Chidambaram, today extended tax sops for the new `ultra mega' power projects and announced the allotment of coal blocks with 20 billion tonne reserves for the power sector.

Presenting the Union Budget for 2006-07, Mr Chidambaram also announced the constitution of an Empowered Committee of State Chief Ministers and Power Ministers for speeding up power sector reforms.

In his Budget speech, Mr Chidambaram said the tax concessions available to generation and distribution companies under Section 80 IA of the Income-Tax Act have been extended till March 2010 for enabling `Ultra Mega' Power Projects to qualify for these sops.

He said that bids for these projects have already been invited, adding that the projects would be handed over to the prospective developers by December 31 this year.

In view of the ongoing fuel shortfall in the power sector, Mr Chidambaram announced the de-blocking of coal reserves of about 20 billion tonnes, which had earlier been reserved for Coal India Ltd and its subsidiaries, to be allotted for the power sector to bridge the shortfall of fuel.


In case of the rural electrification programme, the Finance Minister said the Government plans to provide electricity to 40,000 villages in 2006-07, compared to 10,000 villages in the current financial year.

The total outlay for the Rajiv Gandhi Grameen Vidyutikaran Yojna has been fixed at Rs 3,000 crore in 2006-07 from Rs 1,100 crore this fiscal.


With a view to encourage energy efficiency, Mr Chidambaram also reduced excise duty on compact fluorescent lamps from 16 per cent to 8 per cent. He said the country was likely to see a capacity addition in generation to the tune of about 34,000 MW during the Tenth Plan. Of this, about 15,000 MW would be added in 2006-07.

Reacting to the Budget proposals, a senior NTPC official said the move to de-block coal reserves of 20 billion tonnes for the power sector could ensure some respite from the ongoing coal shortage in the medium term. The proposed amendment to the definition of captive consumption to allow coal mining by power producers with firm supply contracts is also a step in the direction of overcoming the shortages arising out of the existing monopoly situation in mining, he said, adding that duty sops announced for the proposed `ultra mega' projects could ensure that retail tariffs from these projects are around the targeted Rs 2 per unit. A BHEL official said the renewed efforts to put the power sector back on track, especially with significant capacity addition targets set in the Budget and bigger thrust to power sector reforms, would necessitate greater responsibilities on equipment manufacturers like BHEL.

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