Swift approvals for power projects | Budget 2013-14

The country is presently in need of an energy security policy, conveying use of portfolios, basket of fuels; followed by guidelines on how regulators must ensure that at each state level, tariffs are built using bulk sourcing of power, based on prudent mix of portfolio of fuel – comprising of both imported and domestic. In addition, a long-term view needs to be taken to ensure energy security through the development of appropriate alternatives to conventional fuels. A prudent and practical RPO mechanism would serve the objective well to develop these technologies as commercially viable alternatives. There is need to make distributed generation – a ready solution for electrification of rural areas – lucrative for IPPs to encourage more investment and ensure growth. 

Policies pertaining to imported fuel based mega projects need to be suitably modified given the unprecedented rise in imported coal prices and the shortage of domestic coal.
 
Also needed are swift approvals for power projects and favourable implementation policy. Restructuring of the state electricity boards, which are currently in huge losses, should be a priority.

Given the long gestation period and life cycle of 25 years, power projects require long tenure debts, most often on non-recourse project finance basis. Hence, it is pertinent that we not only continue but also increase the existing provision of giving a tax holiday of 10 years to at least 15 years under section 80IA, so as to augment large capacity additions.

Exempting power projects from the levy of service tax would definitely reduce the project cost and be a step towards affordable power for all. The removal of import duty on power generation equipment would also bring down project costs.

Power projects are developed on capital intensive technologies bearing high capital investments. Therefore, the scope for financial incentives to the sector needs to be widened given the sector caps that Indian regulations impose on domestic lenders, so as to attract larger private sector investment.