The Union Budget 2012 appears to have done much with respect to power generation but areas like power generation equipment and power T&D appears to have been largely ignored. Players in the electrical equipment space feel that measures to counter competition from imports, mainly from Chinese suppliers, were conspicuous by their absence.

An overall positive feature for the power sector was the issuance of 10,000 crore of tax-free bonds for the sector. This in part of the 60,000 crore worth of tax-free infrastructure bonds to be floated during FY13.

The Budget has addressed the issue of cold rolled grain oriented (CRGO) steel to some extent. The basic customs duty on coating material for manufacturing of electrical steel has been reduced from 10 per cent to 5 per cent. Additionally, the exemption of special additional duty (SAD) on CRGO has been restricted to prime quality of CRGO steel. Industry players feel that this could curb the usage of scrap CRGO in the country. It may be mentioned that the government is already in the midst of formalizing an order that mandates the usage of old prime grade (BIS certified) CRGO in the country. A transformer manufacturer, interacting with Electrical Monitor, said that the Union Budget proposal in conjunction with the quality order would be in the eventual interest of the industry, with usage of inferior CRGO petering down in the coming years. He also said that these measures should be complemented by concrete steps in initiating domestic production of CRGO in India.

POWER SECTOR: PLAN OUTLAY UNDER MAJOR HEADS
Head	2010-11	2011-12	2011-12	2012-13
	Actual	(BE)	(RE)	(BE)
RGGVY	5,000	6,000	3,544	4,900
APDRP	2,366	2,034	1,668	3,114
CPRI	62	163	75	265
NPTI	23	23	8	11
BEE	100	75	68	117
Total*	42,945	66,383	62,792	62,425
*Includes several other heads

The Budget has adequately addressed the lack of fuel, mainly coal and gas, for power plants. The Budget has fully exempted import of steam coal from BCD and the countervailing duty has also been reduced from 5 per cent to 1 per cent. Although this proposal is valid only up to March 31, 2014, it is expected to benefit coal-fired power plants that are on the verge of commissioning but have not fully tied up fuel supplies. Import of gas in the form of LNG has also been exempted from BCD.

On the other hand, the increase in excise duty and service tax rates has not found favour with electrical equipment manufacturers. The overall capacity utilization level in the electrical equipment industry is already at sub-optimal levels, an analyst felt, stating that the increase in excise duty rates could depress demand even further.

PLAN OUTLAYS
The Plan outlay for the power sector has indeed been lowered to 62,425 crore for FY13 from 62,792 crore for FY12 (RE). It is also disconcerting to observe that the plan outlay for FY12 was under-utilized to the extent of 5.5 per cent. Lowering of plan outlay does not necessarily mean reduction in investment. It could also mean that public sector units under the ministry of power are likely to make capital expenditure through internal accruals and extra-budgetary resources, which is without resorting to budgetary support.

RGGVY: Village electrification appears to be a renewed objective in FY13. The Budget has allocated 4,900 crore for the Rajiv Gandhi Grameen Vidyutikaran Yojana, the nationwide rural electrification scheme under the aegis of Rural Electrification Corporation of India. This is 38.3 per cent higher than the plan outlay of FY12 (RE). It must also be observed that during FY12, the Plan outlay was originally pegged at 6,000 crore (BE), indicating an under-utilization of 40 per cent during the year. During FY13, the government has targeted to electrify 4,800 unelectrified villages and offer electricity connections to 34 lakh BPL (below the poverty line) households.

APDRP: One of the bright spots for the T&D sector has been the increased allocation under the Restructured Accelerated Development & Reforms Programme (RAPDRP). An expert felt that the absence of any specific measure for the T&D sector has been compensated by a higher outlay under R-APDRP. However, the pace of implementation of projects under the project must improve resulting in maximum utilization of the allocations sanctioned. The plan outlay for R-APDRP in FY13 has been fixed at 3,114 crore as against 1,668 crore in FY12. This represents a growth of over 86 per cent. In FY11, the outlay on R-APDRP was 2,366 crore. RAPDRP is a national programme to facilitate state power utilities to reduce AT&C losses to 15 per cent. The programme has two major components. Part-A deals with information technology-based solutions and creation of baseline data, while Part-B involves strengthening of physical distribution infrastructure.

Major changes in the indirect tax regime

Here is a list of major changes in the indirect tax regime with relation to the electrical equipment and the power industry. BCD on coating material for manufacturing electrical steel reduced from 10 per cent to 5 per cent Exemption from SAD currently available to CRGO steel restricted to prime quality of CRGO steel Full exemption from BCD on steam coal along with CVD reduction from 5 per cent to 1 per cent. (Valid up to March 31, 2014) Full exemption from BCD provided to uranium concentrate, sintered natural uranium dioxide, sintered uranium dioxide pellets for nuclear power generation Full exemption from BCD for coal mining projects Full exemption from SAD on equipment for solar thermal projects Concessional rate of 5 per cent BCD extended to raw material for the manufacture of intermediates, parts and sub-parts of blades for rotors for wind energy generators Full exemption from BCD on tri-band phosphor for use in CFL SAD exemption on LEDs required for the manufacture of LED lamps Excise duty on LED lamps reduced to 6 per cent

CPRI: The Budget has made an allocation of 265 crore to the Central Planning & Research Institute (CPRI) for FY13. This high layout generally bodes well for upgrading the country's infrastructure for testing of electrical equipment. Earlier this year, India successfully launched a pilot project for testing 1,200kV power transmission infrastructure. Thanks to the enhanced outlay, CPRI is expected to significantly enhance its competence in the sphere of high voltage and ultra high voltage systems. The plan outlay for CPRI was 75 crore in FY12 (RE) as against 62 crore in FY11.

BEE: There has been a significant hike in the outlay for Bureau of Energy Efficiency (BEE) during FY13 to 117 crore from 68 crore in FY12 (RE). Funds are provided to BEE for implementation of its various schemes. A number of demand side management (DSM) have been initiated by the government to reduce the overall power consumption and improving efficiency of agriculture irrigation, water pumping, street lighting, etc. Some of the major schemes of BEE include Standards & Labeling (S&L) programme and Bachat Lamp Yojana (BLY). Under S&Y, BEE would be responsible for mandatory "star" labeling (indicating energy efficiency) for major energyintensive devices. BLY involves the gradual replacement of energy-efficient incandescent lamps by compact fluorescent lamps (CFL) in households.

CAPEX BY CENTRAL PSUS
The aggregate plan outlay of Central PSUs under the power ministry is pegged at 53,297 crore for FY13 as against 57,373 crore in FY12. The outlay of most PSUs (see table) for FY13 is lower than in the previous year. Central transmission utility Power Grid Corporation of India has outlined a capital expenditure plan of 20,000 crore in FY13, which is 13 per cent higher than the 17,700 crore in FY12 and 12,005 crore in FY11. The CTU has consistently increased its investment outlay in keeping with its objective of developing the National Grid, which will facilitate inter-regional power transfer of 37,500 mw. As of December 31, 2011, such capacity stood at 23,800 mw. Most of the investment outlay by power PSUs is expected to be met through internal accruals and extrabudgetary support, without resorting to budget allocation.

PLAN OUTLAY OF POWER PSUS
	2010-11	2011-12	2011-12	2012-13
	Actual	(BE)	(RE)	(BE)
Damodar Valley Corporation	5,253	5,891	5,891	5,572
NHPC Ltd	3,769	5,090	4,676	4,097
NTPC Ltd	12,818	26,400	26,400	20,995
Neepco Ltd	459	1,037	1,138	1,272
Power Grid Corporation of India	12,005	17,700	17,700	20,000
SJVNL Ltd	567	1,133	1,133	796
THDC Ltd	605	390	435	565
Total for above	35,476	57,641	57,373	53,297
Bharat Heavy Electricals Ltd*	1,771	1,401	1,401	1,696
*Comes under ministry of heavy industries

Bharat Heavy Electricals Ltd, India's largest engineering company, which falls under the Union ministry of heavy industries has outlined a capital expenditure of 1,696 crore in FY13, up 21 per cent from1,401 crore in FY12.

GREEN INITIATIVES
The Union Budget 2012 had several proposals promoting clean energy and environmental protection. Imports duties have been slashed on renewable energy equipment and also energy-efficient lighting devices.

The Budget fully exempted from SAD, equipments for setting up for solar thermal projects. This could bring some relief in the landed cost of imported solar thermal power equipment. The Jawaharlal Nehru National Solar Mission assumes a sizeable proportion of the 1 GW of grid-connected solar power capacity to come from the solar thermal route.

The concessional rate of 5 per cent BCD has been extended to raw materials of the manufacture of intermediates, parts and sub-parts of blades for rotors for wind energy generators.

Full exemption from BCD has been extended to tri-band phosphor for use in the manufacture of compact fluorescent lamps (CFL). Similarly, the excise duty on LED lamps has also been reduced to 6 per cent. The Budget has also proposed to provide SAD exemption to LEDs required for the manufacture of LED lamps.

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