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The Union Budget 2013-14 left the electrical equipment industry a wee bit
disgruntled as it did not envisage any direct-impact measures. It was a case
of expectations not being met—the main demand unmet was to create a duty
regime to check the onslaught of cheap imports. All the same, the Budget
must get credit for addressing two issues—power distribution and the MSME
sector—both of which are critical to overall health of the power value chain.
The Budget exhorted state power distribution companies to take up the
financial restructuring package that was announced last year. A provision of
Rs.1,500 crore has been made for supporting the restructuring provided state
power utilities take it up. So far, power distribution utilities have been reluctant
to subscribe to the fiscal relief package as it puts them under greater pressure
to perform once the assistance is doled out. However, power utilities must
realize that if they carried on as they are now, fiscal deterioration is inevitable.
Electrical Monitor has very often acknowledged the monumental role that the
micro & small and medium enterprise (MSME) sector has been playing in the
electrical equipment industry. The contribution of MSME companies is
immense but the general attitude that the MSME sector portrays is that of
diffidence. The finance minister expressed a very pertinent view. He argued
that the MSME class wishes to "stay small" because it does not want to
"outclass" the fiscal benefits available to MSME companies. By proposing that
financial benefits would subsist for three years even after the entity outgrows
the MSME status is a very welcome move. The return of investment
allowance reserve is also a step in the right direction. The Budget has
proposed to grant fiscal benefits to companies in the manufacturing sector for
purchase of plant and machinery valued at over Rs.100 crore.
Returning to the power distribution sector, urging state power utilities to
accept the financial restructuring package is reasonable but such polite
compulsion is not enough. One must accept that most power discoms are in
weak financial health due to gross mismanagement; relief packages might
not offer lasting solutions. One area that the government should look at very
keenly is privatization of power distribution, at least in those circles where ATC
losses are high. The track record of the government in privatizing power
distribution over the past 5-7 years is pathetic.
The government should accept that changes—non popular ones in particular
—can be made only through unflinching political will. Whenever power
distribution has been privatized, positive results have followed, the teething
problems notwithstanding.
Creating an enabling environment for enterprise to flourish is any
government's prime agenda, and in doing so, there is no escape from
exercising political will in taking futuristic decisions.
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