Khaitan & Co. Power Sector Wish-list for Union Budget 2015

Redressing the financial health of power distribution companies in the country would provide the much needed fillip to the power sector. Budgetary allocations for restructuring of their debts, grant of interest subsidy, moratorium schemes should be considered by the Finance Minister. They should be utilised promptly so that the debts do not stack up and render the allocation dated. Budget allocations for the National Electricity Fund for interest subsidy loans should be made. Creation of a power sector fund to revive stalled and financially stressed power generation projects including equity support and debt restructuring by lenders including deferring interest payment, shifting completion timelines should be considered. To redress the transmission logjam, a separate budgetary provision should be created for laying/augmenting the power transmission systems.

Re-instating the rate of depreciation on wind mills in this budget again to 80% will improve internal accrual for replacement of assets. Further, the minimum alternate tax on power sector needs to be rationalised so that the intended tax benefit and cash flow is not eroded. Also amortization of development cost should be allowed to developers under the Public-Private Partnership (PPP) / Build Operate Terminate (BOT) model although they do not ‘own’ the assets. Additionally, service tax exemption granted to activities like laying of electric cables should also be specifically extended to activities of transmission/distribution of electricity by power generating companies essential for sale of power. For service tax purposes, granting "Electricity Distribution Franchisee” same status as "Distribution Utility" should be considered. Benefits of section 32AC of the Income Tax Act, 1961 should be extended to power generating and distribution companies.