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Report | March 2011

Budgetspeak: Great expectations?

Questions
  • What were your expectations from the budget?
  • Did the Budget deliver what you wanted? If not, then why not.
And what they said...

James Abraham, MD and CEO, SunBorne Energy

The Finance Minister (FM) has reduced the import duty on photovoltaic (PV) cells and modules to zero. But this ignores the needs of the solar industry more widely. In PV, there are other solar components such as inverters and cables. And the entire solar thermal components of mirrors, receivers and turbines have been ignored. As an industry, we will be relying on imported engineering services provided from experienced players. This too has been ignored. The surprising increase in the MAT to 18.5 per cent only hurts the thin returns in the industry. I am encouraged by the infrastructure bond fund. The FM is encouraging foreign funds to invest in infrastructure by reducing the tax they would pay on their returns. In solar, funding large-scale deployment is a hurdle and such infrastructure bond funds can help. But I would have liked to see a solar bond fund, focused specifically on supporting large-scale deployment of solar plants.

Vimal Mahendru, President, IEEMA

We welcome the stability in central excise and service tax rates and the cut in corporate tax surcharge from 7.5 to five per cent but the increase in the rate of MAT from 18 to 18.5 per cent is a dam­pener. There are several issues faced by the domestic electrical equipment manufacturing industry with regard to a level-playing field vis-à-vis imports that have not been adequately addressed. These include the service tax exemption demanded on lines given to other infrastructure segments, imposition of customs duty on import of equipment used for
mega power projects, duty-free import of CRGO electrical steel (a critical raw material for manufacturing transformers) till domestic production commences, etc. Given the effort required in rural electrification, the hike in Central Plan allocation for Rajiv Gandhi Grameen Vidyutikaran Yojana from Rs 5,500 to Rs 6,000 crore is far too less.

The power sector value chain crucially hinges on the financial viability of the distribution sector and reduction of aggregate technical and commercial (AT&C) losses, which is a national imperative. The Restructured Accelerated Power Development and Reforms Programme (R-APDRP), which is primarily focussed on reduction of AT&C losses, should have been allotted more funds. It is surprising that the Central Plan allocation for R-APDRP has been reduced from Rs 3,700 crore last year to Rs 2,034 crore this year. There has been no significant enhancement of allocation of funds for the sector even though efficient power supply is the key ingredient for economic growth and quality of life.

Ramesh Chandak, MD and CEO, KEC

We wanted the transmission and distribution (T&D) sector to be declared as an infrastructure sector. Roads, ports, even power generation is infrastructure and in today’s Budget even agri-godowns have been declared as part of the infrastructure sector. Foreign investments can come through SEBI-registered mutual funds since that will increase investments into infrastructure. The FM's budget looks quite aggressive and he has taken a lot of revenue receipts, but I do not know if he will be able to materialise all those many receipts. The Budget had a general mention about the regulator but a major concern is about transparency issues. He mentioned it, but he has not mentioned any concrete steps. So we may do the same things that we are doing now. That is a matter of concern today.

CVJ Varma, Secy Gen, Council of Power Utilities

This is a routine budget. Basically generation is a question of clearances but that has nothing to do with the Budget per se. We asked that the minimum alternate tax be abolished and carbon credits be exempted from tax to help finance generation of green power. But nothing much has happened.

Robin Banerjee, CFO, Suzlon Energy

This is a balanced, considered budget from the FM building on what has already been a remarkable climb back to our pre-financial crisis growth trajectory as a nation. The strong focus on fiscal discipline and financial programmes will be instrumental in increasing liquidity and this along with increased FIIs investment will widen participation of foreign investors. The continued focus on infrastructure and lowering inflation will also play a great part in drawing in investment, particularly with the promised creation of SPVs as infrastructure debt funds. The MAT on SEZs may discourage fresh investments in export-related activities, however, the positives far outweigh the negatives.

As told to R Srinivasan
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