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Power - In the limelight

The Year 2007 has seen the power sector gaining momentum. India achieved a capacity addition of 34,000 MW in the 10th Plan, taking the capacity to 141,000 MW.

Print Edition: Budget 2008 Special

Power sector gains momentum
Power sector gains momentum
The Year 2007 has seen the power sector Gaining Momentum. India achieved a capacity addition of 34,000 MW in the 10th Plan, taking the capacity to 141,000 MW.

The 11th Plan envisages a total investment of Rs 8.38 lakh crore in the entire value chain of generation (Rs 4.11 lakh crore), transmission (Rs 1.4 lakh crore) and distribution (Rs 2.87 lakh crore).

Driven by the large number of opportunities and high returns, private equity investors pumped in close to $1.1 billion (Rs 4,400 crore) across 25 deals in the sector and raised nearly $8.5 billion (Rs 34,000 crore) through IPOs.

Some interesting developments in the sector are success of competitive tariff-based bidding through UMPP projects, launch of the country’s first power exchange promoted by FTIL & MCX and support of largescale funding (IIFC, Rs 9,700 crore).

Over the last year, the sector witnessed impetus to the power equipment supply, including manufacturing of super-critical steam turbine and generators. There are mushrooming merchant power plants and mega-capacity projects in the backdrop of domestic coal block allocations and acquisition of coal mines abroad. Strengthening of logistics for coal sector; ports and railway projects has also been gaining impetus.

 Corporate impact

  •  
    Biplab Majumder, Managing Director, ABB India
     “The Budget reinforces India’s acute requirement for quality power and the need to add additional capacity through Ultra Mega Power Projects and other power generation projects”

    Biplab Majumder
    Power Finance Corporation: The company will benefit from the Rs 800-crore allocation under APDRP. A utility can get 25 per cent grant under APDRP only if it borrows 75 per cent from PFC

  • Rural Electrification Corporation:The company will get business from the Rs 5,500-crore allocation for the Rajiv Gandhi Grameen Vidyutikaran Yojana. A utility has to borrow 10 per cent from REC against the 90 per cent grant it gets under the programme

  • Reliance Power:The cut in customs duty on project imports will help it get equipment for its proposed projects at competitive rates

  • BHEL: The PSU may face stiff competition to its business due to the cut in customs duty on project imports

Sectoral impact

  • The sector will benefit from the National Fund proposed for transmission and distribution reform projects

  • The fourth Ultra Mega Power Project (UMPP) to be awarded shortly and bidding for 5 more UMPPs is a positive sign for the industry

  • Withdrawal of exemption of special CVD of 4 per cent on imports for non-mega power projects and high-voltage transmission projects would increase project costs

  • Focus on the Rajiv Gandhi Grameen Vidyutikaran Yojana and the Accelerated Power Development and Reforms projects is a positive sign

  • Increase in the composition scheme service tax rate from 2 to 4 per cent likely to raise construction costs

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