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Fourth UMPP at Tilaiya to be awarded shortly; Chhattisgarh, Karnataka, Maharashtra, Orissa and Tamilnadu urged to bring five more UMPPs to the bidding stage by extending the required support.
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Rajiv Gandhi Grameen Vidyutikaran Yojana to be continued during the Eleventh Plan period with a capital subsidy of Rs 280 bn; allocation of Rs 55 bn for FY09.
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Rs 8 bn to be provided for Accelerated Power Development and Reforms Project (APDRP) in FY09.
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Proposal to set up a national fund for transmission and distribution (T&D) reform in the power sector.
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Coal distribution policy and appointment of a coal regulator to bring regularity to the process of coal production and pricing
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Exemption from 4% additional duty of customs has been withdrawn on power generation projects (other than mega power projects)], transmission, sub transmission and distribution projects, and specified goods for high voltage transmission projects.
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Parent company allowed to set-off the dividend received from its subsidiary company against dividend distributed by the parent company; provided that the dividend received has suffered DDT and the parent company is not a subsidiary of another company.
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Aggressiveness in allotting UMPPs to prospective bidders expected to be helpful in speeding up the generation capacity expansion programme.
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Setting up of a national fund for T&D reforms to provide a more focused approach towards these segments.
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Higher allocation to APRDRP to speed up reduction in losses of state electricity boards.
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Coal distribution policy and appointment of a coal regulator to bring regularity to the process of coal production and pricing.
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Removal of exemption from additional customs duty on power generation, transmission and distribution projects to increase cost for companies implementing such projects
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Generation companies like Tata Power, NTPC to benefit from allocation of UMPPs at a faster rate
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National fund for T&D reforms to help the prospects of companies looking at open access, like Tata Power and Reliance Energy.
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Reforms in the coal sector to help generation companies like NTPC, Tata Power and Reliance Power.
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Removal of custom duty exemption on power projects to impact companies like NTPC and Tata Power who are planning to take aid of foreign engineering companies in setting up such projects.
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IEEMA | |
Infrastructure status to power sector on par with telecom, roads and ports | |
Extension of support such as benefits under Section 80-IA of the Income Tax Act | |
Tax relief to be made available to activities in rural areas in line with those extended to the Rajiv Gandhi Gramin Vidyutikaran Yojana | |
Hike budgetary allocation for APDRP scheme to Rs 80 bn by next year | |
Cut excise on products and components supplied to the sector from 16% to 8%
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| Budget 2005-06 |
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Budget 2006-07 |
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Budget 2007-08 |
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Rural infrastructure development fund – a corpus of Rs 80 bn for FY06
Creation of a rural electricity distribution backbone envisaged
To reach electricity to the remaining 125,000 villages and offer electricity connection to 23 m households
Proposal for setting up a 33/11 kV sub station in every hub and at least 1 transformer in every village
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Five ultra mega power projects of 4,000 MW each to be awarded before December 31, 2006
Tenth plan target of 3,075 MW of installed capacity for non-conventional energy sources exceeded by December 31, 2005 with installation of 3,650 MW capacity.
Rs 5.9 bn proposed to be spent on non-conventional energy resources.
10,000 villages in 2005-06 and 40,000 more villages in 2006-07 to be electrified under the Rajiv Gandhi Grameen Vidyutikaran Yojana.
Coal reserves of 20 bn tonnes to be de-blocked for power projects
Customs duty on natural gas reduced from 10% to 5%
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Hike in corpus of Rural Infrastructure Development Fund-XIII from Rs 100 bn to Rs 120 bn
Government's equity support of Rs 164 bn and loans of Rs 30 bn to central public sector enterprises
Facilitation of setting up of merchant power plants by private developers
Private sector participation in transmission projects
Hike in budgetary support for APDRP from Rs 6.5 bn to Rs 8 bn
Increase in allocation for Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY) from Rs 30 bn to Rs 40 bn
Full custom duty exemption on coking coal, from 5% rate currently
Tax on dividend distributed by companies to be hiked from 12.5% to 15%
Tax on dividend distributed by money market and liquid mutual funds to be hiked to 25%
Additional education cess of 1% to fund secondary and higher education
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| [Read more on Budget 2005-06] |
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[Read more on Budget 2006-07] |
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[Read more on Budget 2007-08] |
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| Key Positives |
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| Large investment plans: With the recent string of reforms in the Indian power sector, the sector is expected to grow at a rapid rate going forward. As per the commissioning programme, till March 2010, an aggregate generation capacity of 43,865 MW is expected to come on stream. The government has also indicated of a projected capacity expansion of around 78,000 MW in the 11th five-year plan (2007-12). |
| Electricity Act 2003: The Electricity Act 2003 has provided great opportunity for power companies, given its provisions relating to the abolishment of various licensing norms, liberalisation of the power distribution business and opening of power trading for private sector power companies. Though the track record of execution of such reforms is appalling, the power sector is slowly but surely set for a change. Corporatisation of SEBs and linking profitability to the state government's plan outlay are likely to give some sort of fiscal strength to the key sector participants in the long run. |
| Benefits of unbundling: Provision for unbundling of power generation, transmission & distribution companies has been laid. This will result in reducing T&D losses, as incentives to these private players are directly linked to reduction in T&D losses. |
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| Key Negatives |
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| T&D losses pinch: The T&D losses, which are still on the higher side, result in lower effective realisation of per unit of power produced by generation companies. Poor T&D infrastructure remains a cause of concern. It is due to this and few other factors that the losses are on the higher side as compared to other countries. As a result, the industry is able to deliver less than its actual potential. This, in turn, has also affected the ability of players to re-invest towards growth initiatives. Average transmission and distribution losses (T&D) exceed 25% of total power generation compared to less than 15% for developing economies. The T&D losses are due to a variety of reasons, viz., substantial energy sold at low voltage, sparsely distributed loads over large rural areas, inadequate investment in distribution system, improper billing, and high pilferage. |
| Existing capacity under-utilisation: The poor performance of India's existing generating units has been a principal cause of power shortages and unreliable quality of power supply. The primary culprits are the coal-fired thermal power stations, which accounts for over 65% of total installed capacity. The average plant load factor (PLF) of thermal power stations in India is less than 60%, but varies considerably across regions. However, not all of the thermal generating stations have such dismal records. For instance, the performance of 500 MW and 200 MW units has been satisfactory, and their PLFs have been higher than the national average. It is, in fact, the thermal units of 120/140 MW and below that are cause for concern. |
| SEBs still reeling under losses: Poor financial health of a large number of state electricity boards (SEBs) continues to be cause of concern. Though some measures have been taken to address this issue, these have been inappropriate. Inability to take hard decisions has been impacting industry fortunes. |
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