Voices Budget 2018-19: ICRA’s Comments On Budget Impact On Power And Renewable Energy

Voices Budget 2018-19: ICRA’s Comments On Budget Impact On Power And Renewable Energy
Sabyasachi Majumdar
Sr. VP, Group Head- Corporate Ratings
ICRA Ltd
Power & Green Energy
Proposals
§   Allocation of Rs. 3800 crores and Rs. 4900 crores for Deendayal Upadhayaya Gram Jyoti Yojna (DUGJY) and Integrated Power Development Scheme (IPDS) respectively
§   Allocation of Rs. 16000 Cr. (of which Rs. 2750 Cr. allocated in FY 2019) under “Saubhagya” Scheme to enable last mile connectivity for rural households
§   Mechanism proposed to buy surplus solar energy from solar pumps by the discoms at reasonable price
§   Increased capex by Railways particularly for electrification & augmentation of line network
§   Allocation of Rs. 4200 crores for capacity addition in wind power, solar power and green energy corridor
§   Measures proposed to facilitate the access to bond market for meeting the 25% of debt needs by large corporates, including those rated in “A” category.
§   Reduction in corporate tax rate to 25% for entities with turnover of upto Rs. 250 Cr.
Impact: Positive
Thrust towards ensuring electricity access (24×7) to all rural households under “Saubhagya & DUGJY” schemes is likely to provide a boost in energy demand to some extent, apart from improving the quality of life for rural households. Further, the mechanism proposed to buy surplus solar energy from solar pumps by the distribution utilities as well as push for deployment of solar energy under smart city programme would facilitate solar capacity addition, given the improved tariff competitiveness of solar energy. However, the uncertainty over imposition of duties (import duty / safeguard duty / anti-dumping duty) including timelines & quantum thereofof continues for the solar energy sector. The measures proposed to facilitate the access to bond market for meeting 25% of debt needs by large corporate will allow the entities in power & renewables to diversify the funding sources at cost competitive rate, given the highly capital intensive nature of sector & large funding requirements. The reduction in tax rate to 25% for entities with turnover of Rs. 250 crores is a positive for renewable IPPs, given that a majority of them have capacities of less than 200 MW and thus revenues within the prescribed limit.

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