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FM strikes key notes

Em News Bureau ,  Wednesday, March 13, 2013, 16:32 Hrs  [IST]

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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