Union Budget 2014-15 Reactions: Girish Kadam, VP, Co-head, ICRA
The stated intent of rationalisation of coal linkages for the projects which have been commissioned or will be commissioned by end of FY 2015 will help ensure adequate coal availability & improve the viability of their operations. The proposal for encouragement of banks for accessing long term liabilities would help the power sector by way of improved availability of cost competitive long term funds. Further, extension in eligibility date for power projects to avail of tax holidays till FY 2017 will benefit the power projects which are scheduled to be commissioned till then. Moreover, new rural power scheme announced is expected to improve power supplies for rural households as
well as enable the loss reduction for the distribution utilities. However, hike in coal cess and a marginal increase in customs duty on steam coal would lead to a rise in cost of power generation by about 2.5 paise/unit which will put a pressure on retail tariffs.
Higher budgetary allocation & duty rationalisation are positive for the clean energy sector. The announcement of ultra mega solar projects in four states is expected to facilitate a large sized solar capacity addition in the country & would also encourage domestic manufacturing of solar projects. Duty measures announced for wind and compressed bio-gas projects are also a positive which will help to reduce the capital cost and hence tariffs. In addition, focus on facilitation of evacuation of renewable energy through faster implementation of Green Energy Corridor Projects is expected to further encourage capacity addition.