BackEnergy sector to fuel growth: Goyal
Minister says most of the new business will come from Coal India, PowerGrid, NTPC, EESL in the next 6-8 months
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The coal, power and renewable energy sectors could create new business worth ₹ 1 trillion in the next six to eight months, which in turn will help kickstart growth for firms in these sectors and other related segments such as capital goods, said Piyush Goyal, Union minister of state for power, coal and new and renewable energy.
“I see just the power, coal and renewable energy sector investing or bringing out business worth ₹ 1 lakh crore ( ₹ 1 trillion) in the next six to eight months," said Goyal. The minister was talking at a Mint post-budget analysis conference, Budget 2015: Remaking India held in Mumbai on Friday.
A significant part of this business is likely to come from Coal India Ltd, Power Grid Corp. of India Ltd (PGCIL), NTPC Ltd and Energy Efficiency Services Ltd (EESL).
“Coal India would be placing orders for mining equipment worth ₹ 3,000-5,000 crore and orders worth another ₹ 15,000 crore is expected from Power Grid for their transmission business. Energy Efficiency Services Ltd will also be placing an order worth ₹ 6,000 crore for LED (light emitting diode) lamps," Goyal said on the sidelines of the event.
In addition, the country’s largest power producer NTPC Ltd is also expected to place orders worth ₹ 30,000-35,000 crore for power plant equipment.
The pickup in orders from public utilities will help the capital goods sector in particular, which has been struggling due to a fall in fresh orders which were impacted by a slowdown in the investment cycle in the economy.
This has impacted the earnings of key capital goods firms including state-run Bharat Heavy Electricals Ltd, which reported a 69.4% year on year fall in its net profit for the December 2014 ended quarter to ₹ 212.6 crore. BHEL’s net sales also dropped by 28.2% to ₹ 6,078 crore during December quarter from ₹ 8,462.4 crore in the year-ago period, impacted by both power and industry segments.
India’s largest engineering and construction company, Larsen and Toubro Ltd, in February revised its order inflow growth guidance from 20% to a range of 15% to 20% for the current financial year.
Goyal noted that the government’s attempt is to kick-start the public investment cycle and measures announced in the annual budget are aimed at this.
“This budget referred to kick-starting growth and everyone in this room will agree it is on the back of public investment that we will see private investment coming up in a big way," Goyal said in his speech at the event.
In the budget, finance minister Arun Jaitley announced greater outlays for sectors such as roads and railways and committed to a significant increase in capital expenditure directly and via central public sector enterprises (CPSEs).
“Total capex (budget accounts and CPSEs) is budgeted to increase by ₹ 1,290bn (0.9% of GDP, 30%YoY), with central government capital expenditure accounting for 0.2% points of increase (25%YoY) and central public sector units capex accounting for 0.7% of GDP increase (34%YoY)," said a Morgan Stanley report released on 1 March.
“We need to manage our expenditure better. There is a need to change from a consumptive expenditure to productive expenditure," Rana Kapoor, MD & CEO of Yes Bank said at the event.
“Long term programmes will take long, but short term issues need to be sorted right away. 395 stalled projects need to be catalyzed as early as possible to de-stress the economy. We hope to see more action sooner or later in the aviation sector. Tourism, hospitality and culture related tourism need to be looked at more. Infrastructure in totality is and should be the single most driver in this budget and future budgets," Kapoor added.
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