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EY India Speaks on the Budget Outlay on Power & Renewables Sector

 Dr Archana Verma

EY interacted with us about the Union Budget's proposal on the power and renewable energy sector. It highlighted the many efforts at development of infrastructures that have been proposed. 

“The Union Budget targets 100 percent electrification of broad gauge railways to be achieved by 2023. As of August 2020, 65 percent electrification has been achieved. It is hoped that a significant part of this will be from renewable energy. Significant focus on asset monetisation including PGCIL and other transmission assets will enable unlocking value and also generate additional revenue for transmission companies that can hopefully be partly shared with consumers to bring down tariffs.”

“A revamped scheme with an outlay of over 3 lakh crores would be launched for distribution turnaround through infrastructure creation and interventions such as Smart Metering, feeder separation, etc. While providing for this scheme, the Budget also puts additional pressure on Discoms to improve by providing the choice of suppliers to consumers through a special framework. This has been pending for a long time and is welcome and will require the separation of carriage and content.”

-- Somesh Kumar, Partner and Leader, Power & Utilities, EY India

There is an enhanced outlay for the renewable energy sector through SECI and IREDA, which will enable larger focus on augmenting renewable energy. In addition, a comprehensive National Hydrogen Mission to be launched to generate hydrogen from renewable sources is a welcome move. Certain initiatives for overall infrastructure sector like setting up of a Development Financial Institution for debt financing and setting up of a central asset management company for taking over stressed assets will benefit the power sector in a big way,” said Somesh Kumar, Partner and Leader, Power & Utilities, EY India.

Although an initial overview of the proposed developments look very positive, there are greater questions that have remained unanswered as to from where the money for these expenses will come. Further, although the export is under NIL GST, the requirement of filing GST even if business is NIL is mandatory and there are other compliances that an exporter has to fulfil. Besides, the manufacturing of quality products at low cost requires a low cost capability. The government is yet to find solutions for these.

EY's comment does not focus on these practical roadblocks in the development of power and renewable infrastructures.