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Budget | April 2012

Vijay Karia, CMD, Ravin Cables

The government has unfortunately not focused on the growth of the power sector, T&D sector and has entirely ignored the electrical industry which is the key to the power sector, says Vijay Karia, CMD, Ravin Cables

The Budget has been a big letdown for the power sector which was looking for a revival of sorts by way of focused policies presented in the Budget by the Government in India. The Finance Minister has unfortunately not focused on the growth of the power sector, and has entirely ignored the electrical industry which remains the key to the power sector.

Vijay Karia, CMD, Ravin Cables, said, "The budgetary allocations proposed are very weak and would not really benefit the industry. In order to meet the targets of GDP growth, the government had an ideal platform to focus on the power segment and the electrical industry in particular. Unfortunately, they have not chosen to do that, and have not done anything for the sector. It is now clear that the electrical industry would have to survive despite the government policies, as they cannot survive because of the policies."

The ills facing the sector are many, and also the solutions could be simple if the government decided to implement them:

a. Excessive capacities on the manufacturing side which leads to under utilization of plants, thereby making the products even more expensive.
b. Higher interest costs, for which the FM has proposed to replace the high cost rupee loans partially by ECB's, but ECB's would have to be covered for a hedge against foreign exchange fluctuations and this would not help in reducing the overall cost of finance.
c. The threat of cheaper imports from China has not been addressed. It is time for the government to realise that the power sector just does not consist of power generation equipment but also has transmission and distribution (T&D) components which are vital but being ignored, especially the distribution segment.
d. The transmission and distribution segment, where maximum T&D losses occur has not been protected at all from cheaper imports. Nor is there any stipulation to bring in technology into these areas, and hence the country will always suffer from the deficit of access to technology in the T&D segment, as well as the higher costs of manufacturing local equipment in the country is going to render the domestic players uncompetitive.
e. The power sector has failed miserably in addition of power generation capacity. Against 78,700 MW planned in the XIth Five year plan, they will land up with about 52,000 MW, a deficit of approximately 34 per cent. In order to condone such delays in addition of capacity, due to various reasons like allocation of land, fuel linkages etc. the Government has increased the sunset date by one year for the power sector undertakings for claiming deduction of 100 per cent profits for 10 years. Though this is a small positive, such extensions do not address the woes of the power sector nor do they address the problems of electrical equipment manufacturing sector.

The solutions are:

a. Focus on reducing T&D losses, especially distribution losses.
b. Speed up privatisation of the distribution segment through well laid policies.
c. Encourage local manufacturing with guarantee of buy back for technology products.
d. Encourage import of technology and force R&D centres to be set up in the country.
e. Emphasise on the Indian brand and not the multinational brand which has not brought technology into the local units. Encourage 50/50 joint ventures with Indian companies and discourage 100 per cent FDI in the manufacturing segment, as the multinationals will come here just to tap the markets and make their money.
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