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Budget 2013 - Power

Tuesday 19 March 2013

Power stays neutral and low voltage!

The Union Budget 2013 has proposed a PPP policy framework with Coal India Limited as one of the partners to step up the production of coal for supply to power producers and other consumers. This move is also expected to reduce dependence on imported coal. The move is expected to positively impact the power sector in general as it grapples with the shortage of domestic coal.

However, the announcement to increase import duty on steam coal from 0% to 2%, reducing the import duty on bituminous coal from 5% to 2% is expected to impact companies in this sector. Simultaneously, increasing CVD on steam coal to 2% from 1% and CVD on bituminous coal reduced from 6% to 2% is expected to impact the power producers based on imports of coal, although such an impact is largely expected to be minor in nature.

The Union Budget has also proposed an extension of the sunset date by one year for power sector undertakings so that they can be set up on or before March 31, 2014 in order to claim 100 per cent deduction of profits for 10years. While this move is extremely positive, it was largely expected and hence has no major impact on the sector.

So who wins this year?

While the recommendations and proposals for the Power sector seem lack lustre, consumers can expect much in terms of renewable energy sources and thereby cleaner, cheaper and efficient energy in the days to come.

Want the stalwart of the industry analyze the budget for you? Click here.

Looking to invest in the Power sector? Click here to open an account with Kotak Securities.

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