None of the major demands of the industry, including service tax exemption for all power projects, duty free import of CRGO electrical steel (a critical raw material for manufacturing transformers), demand for a level playing field for domestic electrical equipment manufacturers vis-Ã -vis imports, have been acceded to according to Ramesh Chandak.
The hike in service tax and excise duty rates, will further impact the top-line and the bottom-line of electrical equipment manufacturers and consequently their commercial viability, who are already facing a crunch and working at broadly 65% of their production capacities.
Given the huge effort required in rural electrification, the fall in Central Plan allocation for Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY) from Rs 60 billion (BE 2011-12) to Rs 49 billion (BE 2012-13) is a matter of concern. Further, the revised estimates of Rs 35.44 billion against the budget estimates for 2011-12 show that funds provided have not been fully utilised.
The entire power sector value chain crucially hinges on the financial viability of the power distribution sector and reduction of aggregate technical & commercial (AT&C) losses, close to 30% currently, is a national imperative. The Restructured Accelerated Power Development and Reforms Programme (R-APDRP), which is primarily focussed on reduction of AT&C losses, has seen a welcome hike in Central Plan allocation from Rs 20.34 billion (BE 2011-12) to Rs. 31.14 billion (BE 2012-13), but here again the revised estimates for 2011-12 (Rs 16.68 billion) show under-utilisation of allotted funds.
The additional Rs. 10,000 billion provision for tax free infrastructure bonds for the power sector, reduction of withholding tax from 20% to 5% on interest payments on external commercial borrowings for power sector, the extension of the sunset date by one year for power sector undertakings for claiming 100% deduction of profits for 10 years are some positive features of the Budget proposals.
Source- My Iris