union budget 2014-15 : power sector

8/12/2019 Union Budget 2014-15 : Power Sector

1/14

Union Budget 2014-15Power, Coal and Capital Goods

Virendra Patil

TBWES 11-07-2014


2/14

Highlights

Sunset clause for tax holiday for power generationextended for 10 years

Assures coal supply to plants commissioning byMarch 2015

Allocates Rs 1,000 crore for clean energy schemes

Excise duty exemption on raw materials forrenewable energy equipments

Levies uniform 2.5% custom duty and 2% CVD oncoal

Budget allocation for power sector increases by 11%

Outlay for coal sector up by more than Rs 1,620 croreat Rs 12,561 crore

2 11-07-2014


3/14

Sunset clause for tax holiday for power generationextended for 10 years

Finance Minister, Arun Jaitely, has set a new trend in hismaiden budget by extending the tax holiday enjoyed bycompanies involved in a generation, transmission anddistribution business for a straight ten year period instead ofan annual extension.

Pertinently, an annual extension to this tax holiday hadbecome a sort of norm in the budget announcements for thepast few years.

Breaking the norm, Jaitely has decided to give the taxholiday for a longer period of ten years to the companieswho begin generation, transmission or distribution of powerbefore March 31, 2017.

Justifying his move, the Jaitely noted that stability in policyis critical as it will help investors plan their investmentsbetter.

To note, this tax holiday is provided to the power sectorunder Section 80-IA(4)(iv) of the Income Tax Act

3 11-07-2014


4/14

Assures coal supply to plants commissioning byMarch 2015

Coal shortage is the biggest problem plaguing the Indianpower sector currently. Even more worrisome is the situationof those power plants that are likely to come by March, 2015but have no assured coal linkages with them.

While the Presidential Directive issued in July, 2013 assuredcoal supply to 78,000 MW worth of power plants, the Finance

Minister has gone one step forward by assuring coal supply toall power plants which are already commissioned or will comeup by March, 2015.

The Minister is confident that this move will help unlock deadinvestments.

Giving his maiden budget speech in the Parliament, theFinance Minister contended that, "comprehensive measures forenhancing domestic coal production are being put in placealong with stringent mechanism for quality control andenvironmental protection, which includes supply of crushedcoal and setting up of washeries

".

He further noted that an exercise to rationalise coal linkages tooptimise transport of coal and reduce cost of power is alsounderway.4 11-07-2014


5/14

Allocates Rs 1,000 crore for clean energy schemes

According highest priority to renewable energy in his powersector related schemes in his budget allocations for thecurrent fiscal, the Finance Minister Arun Jaitely has decidedto allocate Rs 1,000 crore approximately for introducing newclean energy schemes in the country.

On this account, the Minister has set aside a sum of Rs500 crore for setting up of ultra mega solar powerprojects in Rajasthan, Gujarat, Tamil Nadu, and Ladakh inJ&K.

Morever, an additional Rs 100 crore is set aside for thedevelopment of 1 MW Solar Parks on the banks of canals.

The Minister has also allocated Rs 400 crore for a scheme

for solar power driven agricultural pump sets and waterpumping stations for energizing one lakh pumps.

Implementation of"Green Energy Corridor Project will beaccelerated in this financial year to facilitate evacuation ofrenewable energy across the country", the Minister added.

5 11-07-2014


6/14

Excise duty exemption on raw materials forrenewable energy equipments

Furthering his emphasis on development of renewableenergy in the country, Finance Minister, Arun Jaitely hasprovided excise duty exemption on critical raw materialused in solar, wind and biomas equipments. These productsand materials that have been exempted are as follows:

EVA sheets and solar back sheets and specified inputs used

in their manufacture Solar tempered glass used in the manufacture of solar

photovoltaic cells and modules

Flat copper wire for the manufacture of PV ribbons for usein solar cells and modules

Machinery and equipment required for setting up of a

project for solar energy production Forged steel rings used in the manufacture of bearings of

wind operated generators

Machinery and equipment required for setting up ofcompressed biogas plants (Bio-CNG)

6 11-07-2014


7/14

Levies uniform 2.5% custom duty and 2% CVD on coal

As a measure to levelise the custom duty and CVD onvarious coal varieties, the Finance Minister has rationalizedthe duty structure on all non-agglomerated coal at 2.5percent basic customs duty and 2 percent CVD.

With this tax rationalization measure in place, anthracite

coal, bituminous coal, coking coal, steam, coal and othercoal will attract the same duty.

Earlier, the custom duties varied depending on the variety ofcoal.

Now, by levying a uniform custom duty and CVD, Jiatelyaims at eliminating all assessment disputes and transactioncosts associated with testing of various parameters of coal.

However, in the current year budget estimates, Jaitely hasincreased the duty on metallurgical coke from Nil to 2.5percent in line with the duty on coking coal

7 11-07-2014


8/14

Budget allocation for power sector increases by 11%

Increased the budgetary outlay for the power sector to Rs 60,384crore for 2014-15, from the revised budget allocation of Rs53,962.89 in the previous fiscal.

Allocation for investments in public power sector enterprises has alsobeen increased substantially, to Rs 51,425.84 crore this fiscal, fromthe revised allocation of Rs 49,731.90 in 2013-14.

The budgetary support extended for the power ministry's ruralelectrification scheme, Rajiv Gandhi Grameen Vidyutikaran Yojana(RGGVY) has also increased. The scheme now stands to receive Rs4,850 crore, against the revised budget estimate of Rs 2,868.5 crorefor the previous fiscal.

Further, the budgetary support for research and developmentprograms has been increased manifold, from Rs 20 crore in therevised budget estimate for the previous fiscal to Rs 295.53 crore forthe 2014-15 fiscal.

Taking due cognizance of the T&D programs, the lump sum provisionfor various schemes has been enhanced to Rs 2,036.36 crore, fromthe previous year revised estimates of Rs 566.40 crore. This, it maybe said, signals the urgent impetus that the government has put ondevelopment of T&D infrastructure in the country.8 11-07-2014


9/14

Outlay for coal sector up by more than Rs 1,620 croreat Rs 12,561 crore

total outlay for the coal sector to Rs 12,561 crore, as against therevised expenditure estimate of Rs 10,940.14 crore for the previousfiscal year.

The government has increased its budgetary support to Coal IndiaLimited (CIL) to Rs 5,225 crore, as against the previous Rs 5,000crore.

It should be noted that the budgetary support of Rs 2,936 crore andRs 3,850 crore have been provided to Neyveli Lignite CorporationLimited and Singareni Colleries Company Limited, respectively.

The contribution to the coal mines pension scheme has increasedfrom Rs 22 crore to Rs 24 crore. Conversely, the budgetaryprovision for conservation and safety of coal mines has remainedthe same at Rs 169.83 crore.

Further, the budgetary support for development of road and railtransport infrastructure in the coalfield areas and research anddevelopment programs has been increased from Rs 86.65 crore inthe previous fiscal to Rs 92.95 crore for the 2014-15 fiscal.

9 11-07-2014


10/14

Outlay for MNRE (renewable)pegged at Rs 3,941 crore

Pertinently, the plan outlay for new and renewable sourceshas increased to Rs 3,941 crore as against the revisedbudget estimates of Rs 3,392.75 crore in previous fiscal.

Allocation for investments in Grid Interactive and DistributedRenewable Power has been increased substantially, from Rs1144.83 crore in previous year revised estimates to Rs 1,949crore this year.

Notably, Indian Renewable Energy Development Agency(IREDA) and Solar Energy Corporation Of India (SECI) arethe two big players in the new renewable energy market.

Keeping in view the urgency to tap the solar potential of thecountry, IREDA has been backed by the government with aplan outlay of Rs 3,040 crore in the current fiscal, as againstthe revised estimates of Rs 3,011 crore for FY14.

Moreover, the planned outlay for SECI has increased from Rs36 crore in previous year to Rs 55 crore in the current year.

10 11-07-2014


11/14

Total plan outlay for nuclear power schemes at Rs 8,213.42 croreagainst the revised outlay of Rs 6,073.72 crore for 2013-14.

As per the scheme wise allocation presented in the Union Budgetspeech, the outlay for the Rajasthan Atomic Power Station saw amarginal increase at Rs 84.77 crore against the previous year'srevised outlay of Rs 83.83 crore.

Similarly for the Bhabha Atomic Research Centre and the IndiraGandhi Centre for Atomic Research, a slight increase in allocation isseen at Rs 8 crore and Rs 9 crore respectively.

However, budget allocation for neighborhood development project inKundankulam is a whooping Rs 150 crore compared to revisedoutlay of Rs 20 crore for 2013-14.

Also the allocation for investment in public sector is pegged at Rs643 crore, more than double of last year's Rs 307.88 crore. Othermajor allocation for the nuclear power sector are made for Heavywater pool management at Rs 950 crore

Nuclear power : Allocation of Rs 8,213 crore

11 11-07-2014


12/14

Other highlights

Allocates Rs 500 crore to provide 24x7 power supply: Committed toprovide 24x7 uninterrupted power supply to all homes, thegovernment in the Budget 2014-15 has noted that Deen DayalUpadhyaya Gram Jyoti Yojana for feeder separation will belaunched this fiscal.

This scheme will help augment power supply to the rural areas andfor strengthening sub-transmission and distribution systems.

The Finance Minister has allocated a sum of Rs 500 crore for thispurpose.

Provides concessional basic custom duty on machinery needed forbio-gas plants: The Finance Minister has also shown his inclinationto promote bio-gas energy in the country.

To this end, he has proposed a concessional basic customs duty of5 percent on machinery and equipment required for setting up ofcompressed biogas plants (Bio-CNG).

Ensures optimum exploitation of CBM reserves: Keen on fullyutilising the available natural resources of the country, the FinanceMinister in his budget speech has noted his government`s intentionto accelerate production and exploitation of Coal Bed Methane(CBM) reserves of the country.

12 11-07-2014


13/14

Capital Goods

Banks will be permitted to raise long term funds forinfrastructure lending with minimum regulatory pre-emption such as CRR, SLR & PSL. This would lower thecost of funds by 100-200 bps

Reduced capex threshold to Rs 250 mn from Rs 1 bn

earlier for availing higher depreciation rate of 15% Debt facility for urban development raised from Rs 50 bn

to Rs 500 bn for next five years

FDI in Defense raised to 49% from 26%

Subsidies for wind turbine sector not restored

Outlays: Increase in Defense by 20%, Railways budgetarysupport hiked by 25%

13 11-07-2014


14/14

Thank YouVirendra Patil

TBWES

14 11-07-2014

union budget 2014-15 : power sector

Documents