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Published:February 3, 2020 5:53 PM

Excerpts of Budget 2020 for Power Sector

Excerpts of Budget 2020 for Power Sector

The Budget 2020 highlights as the growth of Indian economy appears to have bottomed out and is expected to pick up in FY 2020-21, the prospects shall be assessed in the light of emerging global and domestic challenges and opportunities. The challenges can be described as both external challenges as well as domestic challenges. While the major challenges for the economy arising from the external front are geo-political tensions in Middle East and rising crude oil prices due to supply disruption which may decelerate growth and increase inflation. The challenges in the domestic front are flagged as revival of investments and savings.
The government stays positive on continuation of structural reforms and expects this will revive growth and expected normalization of credit flow as investment picks up induced by a cut in the corporate tax rate and anticipated transmission of repo rate cuts earlier implemented by the Monetary Policy Committee. Furthermore, the global economic growth is expected to pick up in 2020 which could also support India's growth. As the government expects the economy to grow at 10 percent during FY 2020-21, various announcements have been made during the budget regarding Power Sector. The excerpts are Budget 2020 for Power Sector are given below:
  • The budget intends promotion of smart metering in distribution utilities with support from the States and Union Territories by replacing conventional energy meters by prepaid smart meters in the next 3 years.
  • The budget also proposes to provide about INR 22,000 crore to power and renewable energy sector in 2020.
  • Existing KUSUM scheme shall be expanded and this modified scheme will help 20 lakh farmers for setting up stand-alone solar pumps and further to help another 15 lakh farmers to solarize the grid-connected pump sets.
  • In addition to the modifications in KUSUM scheme, a scheme would be enabling the farmers to set up solar power generation capacity on their fallow/ barren lands and to sell the power generated to the grid.
  • The government to promote the use of solar pumps and solar energy production in non-cropping season.
  • It has been emphasized that to the existing thermal power plants that are old and have higher carbon emission levels. It has been emphasized to close such power plants having higher emissions and to use the vacated spaces for an alternative use.
  • The budget proposes to extend the concessional corporate tax rate of 15% to new domestic companies engaged in the generation of electricity. In order to attract investment in the power sector, the concessional corporate tax rate of 15% provided by the Taxation Laws (Amendment) Act, 2019 to new domestic companies that are engaged in the generation of electricity subject to the condition that they start generating electricity by 31st March, 2023.
  • The Budget Estimates of Expenditure for 2020-21 show an increase of INR 3,43,678 crore over the Revised Estimates 2019-20 and one of the reasons which has been highlighted is on account of higher provisions made under Road Transport, Railways & for infrastructure projects in National Infrastructure Pipeline (NIP).
  • The overall budget outlay of INR 40,740 crore has been laid down for energy sector during 2020-21 as compared to revised estimates of INR 38,127 crore during 2019-20.
  • Similarly, to improve the financial sector which includes Banking, Insurance, Financial Market and Infra Finance segment an overall budget outlay of INR 40,433 crore has been placed during 2020-21 as compared to revised estimates of INR 23,686 crore during 2019-20.
  • The budget has approved the Setting up of Credit Enhancement (CE) Company to provide credit enhancement to infrastructure projects. The Budget has recognized the fact that traditional source of infrastructure finance which is bank finance suffers from issues such as asset-liability mismatch and leads to problems like NPA in banks and at the same time it claimed bond financing of infrastructure is a better option for infrastructure projects.
  • As per the budget, the proposed CE Company will enhance the rating of the bonds issued by infrastructure companies, thereby making it amenable to investment from institutional investors.
  • It is proposed to set up large solar power capacity alongside rail tracks on railway land.
  • In order to create a level playing field for domestic producers, the custom duty rate has been hiked from 5% to 7.5% for some specified goods used in high voltage power transmission project.
  • A budget of 704 Crore has been allotted under budget estimates of 2020-21 for creation of assets and strengthening of transmission system in the states of Arunachal Pradesh and Sikkim. While a sum of 338 Crores has been allotted under Power system improvement project for North Eastern Region.
  • Under the flagship schemes of DDUGJY and IPDS, a budgetary sum of 7,962.5 has been estimated during 2020-21. 

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