Mumbai: Power producers expect the federal budget to reduce duties on coal imports to top up scarce domestic coal supply in a country where more than half the power plants are coal-fired, industry players and analysts said.
“Power project owners expect a cut in the import duty on the coal, which is at 5% at present. This will significantly reduce their fuel bills,” an analyst with a Mumbai-based brokerage said.
The move is expected to benefit importers including JSW Energy, Adani Power and Tata Power, Rupesh Sankhe, analyst at Angel Securities, said.
They also expect a higher spending on federal government’s flagship schemes, namely Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY) and Restructured Accelerated Power Development and Reforms Programme (R-APDRP), to spur growth in the power sector.
Excise duty, which was lowered from 12%t to 8% under the stimulus package, could be raised by at least 2 percentage points to mop up additional revenue for bridging the fiscal deficit, a Mumbai-based analyst said.
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But not many are overly worried about that.
“The case for investing in India’s power infrastructure is extremely strong. So, partially withdrawing temporary benefits which were conferred under stimulus package, is not going to impact the industry very adversely,” said Vardhan Dharkar, chief financial officer of KEC International.
Power project developers are eyeing an extension of income tax exemption under clause 80 IA beyond 2010-11, which analysts say is most likely, considering a 12 percent peak power deficit and a crying need for private investment in the sector.
A recent government panel report suggested the imposition of a 14% duty on imported power gear to safeguard interests of domestic gearmakers.
“There is a 15-20% disadvantage for Indian manufacturing. In order to give a level playing field, definitely there is a need for the duty to be put in,” Murali Venkatraman, president of Indian Electrical and Electronics Manufacturers’ Association (IEEMA) said.
But private power plant owners say domestic generation equipment are in short supply and a duty on imports will penalise them if they source from overseas. This will jeopardise India’s massive capacity addition programme, they say.