Within the Power sector the Transmission & Distribution (T&D) sector merits equal if not more attention. The more serious problem is one of under-investment in the T&D sector. For the last 50 years, India has been able to investment barely half of the desired level of investment in the T&D sector. Transmission lines in India are loaded up to 90 per cent in India against the world standard of 60-65 per cent. While issues those relating to the financial health of SEBs have been addressed in some way by means of a bailout package, its impact is not likely to be seen in the short term. The Union Budget therefore needs to emphasise on accelerating investment in the power T&D sector.
At a time when new investments have reduced, across all sectors, doing away with retrospective amendments in Direct Tax Laws can improve India's image amongst Investors by reducing the uncertainty in regards to Tax Laws and improve growth prospects. Furthermore, with the prospects of the Goods and Services Tax (GST) seeming unlikely in the immediate future, the government can look at halving the Central Sales Tax (CST) from the existing two per cent to one per cent, to stimulate investments.
Keeping in line with other infrastructure projects like roads, airports, ports, railways, transport terminals etc the government should also consider extending service tax exemption to all power projects, including power generation, transmission and distribution projects. This would reduce the cost of Power Generation and Distribution, as Power Generation and Power Distribution Companies are not entitled to credits on tax paid on procurements.
Another subject that would benefit the T&D sector is the creation of a corresponding provision in the CST Act to grant exemption to sub-contractors/sub-vendors supplying goods to SEZ unit/developer/co-developer. As per Section 8(8) Central Sales Tax Act 1956, there is exemption of CST for supply of manufactured goods to SEZs against form 'I'. Section 26 of SEZ Act read with Rule 10 of SEZ Rules, allows exemption of CST to sub-contractors only.
Last but not least we need to strategically plan the domestic availability of Cold Rolled Grain Oriented (CRGO) steel. CRGO electrical steel which is a critical raw material for manufacturing of transformers at present CRGO is fully imported as it is not manufactured in India. Although the Special Additional Duty (SAD) has been removed on CRGO, NIL duty imports should be allowed till indigenous production is made available.
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