As anticipated, the Budget had little to offer to thermal coal and power sector in general, except the emphasis on blending domestic and imported coal and marketing them through pooled pricing mechanism.
While the framework of price pooling is yet to be firmed up, the decision will help private sector capacities at the cost of consumers of State-owned utilities.
According to sources, the private producers are also expecting the Government to allow revision of long- term power sales agreements in March. The Centre is currently evaluating two such proposals from Tata Power and Adani Power.
Import and tax holiday
The Budget proposed extension of 10-year tax holiday to generation capacities to be implemented in 2013-14. According to Amit Patel, Analyst with Angel Broking, the move was anticipated. However, he could not confirm the total capacities to be benefited.
The Budget also proposed imposition of two per cent customs duty and two per cent counter veiling duty on all power grade coal. According to importers, this will impact the landed cost of imports by approximately three per cent.
According to NTPC, the proposed duty on imported coal along with the freight increase announced in the Railway Budget, may increase the cost of generation by over 5 paise per unit.
Rural electrification
Meanwhile, there is concern on completion of rural electrifications spilled over from last Plan period as the Finance Minister did not announce fresh allocations in his speech. There was no mention of the Restructured Accelerated Power Development and Reforms Programme, designed to electrify smaller (30,000 population) urban areas, either.
Restructuring of Discoms
Though the Finance Minister urged the distribution utilities to enter into MoUs with the Centre for financial restructuring of discoms, sources point out that in the absence of significant fiscal incentive, the scheme did not attract much response.
No major State has yet entered into an MoU with the Centre. States such as Rajasthan are negotiating with banks for loan restructuring.
Nothing for coal
On stepping up domestic production, the Budget relied on “PPP policy framework, with Coal India Ltd as one of the partners”. Sources, however, told Business Line that the existing law does not allow PPP models such as BOT or BOO in coal production.
CIL recently took an initiative to expand the scope of appointing mine developer and operators (MDO). According to Chairman S. Narsing Rao, the company is hopeful of making progress in awarding a few such contracts by the first half of 2013-14.