Budget 2018: Positive impact on power sector, Saubhagya to boost demand

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Source: The Economic Times
Friday, February 02, 2018

 NEW DELHI: The Union Budget for 2018-19 is likely to have an overall positive impact on the power sector with the thrust towards expanding electricity access through flagship schemes is seen boosting demand and a proposed mechanism for uptake of solar power likely to spur capacity creation. 

However, the uncertainty over imposition of duties - import duty, safeguard duty and anti-dumping duty on solar -- including timelines and their quantum continues for the solar energy sector. The industry was expecting the budget to provide clarity on the issue. 

The budget allocates Rs 3,800 crore for Deendayal Upadhayaya Gram Jyoti Yojna (DUGJY) and Rs 4,900 crores for Integrated Power Development Scheme (IPDS). The government has also allocated Rs 16,000 crore for the Sahaj Bijli Har Ghar Yojana (Saubhagya) to enable last mile connectivity for rural households. 

"The thrust towards ensuring electricity access to all rural households under Saubhagya & DUGJY schemes is likely to provide a boost in energy demand to some extent, apart from improving the quality of life for rural households. Further, the mechanism proposed to buy surplus solar energy from solar pumps by distribution utilities as well as push for deployment of solar energy under smart city programme would facilitate solar capacity addition, given the improved tariff competitiveness of solar energy," said Sabyasachi Majumdar, Senior Vice President at ratings agency ICRA. 

The budget has proposed a mechanism to buy surplus solar energy from solar pumps by the discoms at reasonable price. The government has also allocated Rs 4,200 crore for capacity addition in wind power, solar power and green energy corridor project. 

In other key proposals seen impacting the power sector, the budget has proposed measures to facilitate the access to bond market for meeting the 25 per cent of debt needs by large corporates, including those rated in "A" category. It has also reduced the corporate tax rate to 25 per cent for entities with turnover of up to Rs 250 crore. 
"The measures proposed to facilitate the access to bond market by large corporate will allow the entities in power and renewables to diversify funding sources at cost competitive rate, given the highly capital intensive nature of the sector and large funding requirements. Also, the reduction in tax rate to 25 per cent for entities with turnover of Rs 250 crore is positive for renewable IPPs, given that a majority of them have capacities of less than 200 MW and thus revenues within the prescribed limit," Majumdar said. 

This year's budget has also increased the capital expenditure by Indian Railways particularly for electrification and augmentation of the line network - a move that is likely to create additional power demand. 

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