Indian Fiscal Budget 2013-14: Analysis on Energy Sector


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Indian Fiscal Budget 2013-14: Analysis on Energy Sector

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Indian Fiscal Budget 2013-14: Analysis on Energy Sector

  1. 1. Fiscal Budget:2013-14 IMPLICATIONS ON ENERGY SECTOR Presented by Group 4 Amistya Kumar Hareesh Nalam Raman Sharma Saurav Shridhar Tarini Prasad Sahoo
  2. 2. Agenda • Fiscal Budget : Backdrop • Fiscal Budget : Objective • Fiscal Budget : A macro-economic perspective • Fiscal Arithmetic for Financial Year 2014 • Fiscal Budget : What’s in for Energy Sector • Power, Coal, Renewables, Oil & Gas Sector
  3. 3. Backdrop of Budget • Slowing Global Economy • Increasing Fiscal Deficit & CAD • Dark shadow of Inflation • Quest for sustainable and inclusive development • Impending General Elections
  4. 4. Fiscal Budget : Objective Taxation, Public Savings & Private savings Development by effective Mobilization of Resources Investment in Poverty Alleviation Programmes Efficient allocation of Financial Resources Reduction in inequalities of Income and Wealth Encourage production of desirable goods and discourage socially undesirable goods. Facilitates the capital formation Reducing the Deficit in the Balance of Payment Increasing National Income Imposing duties on imports or by giving subsidies to export. Foreign Exchange Earnings Encourage more exports
  5. 5. Fiscal Budget 2013-14: A macro-economic perspective • Finance minister has articulated a Fiscal Deficit (FD) target of 4.8% of GDP during FY14 • Total expenditure has been budgeted at 16,652.97 bn, a 16% increase as compared to the revised estimates (RE) of FY13 • The budget estimates a higher collection of tax and non tax revenue • Focus of the government towards increasing investment in infrastructure • Measures would yield the desired results only on effective and timely execution
  6. 6. Fiscal Arithmetic for Financial Year 2014 • Reviving the economy on a sustainable growth remains a major challenge during FY14. • The subsidy though budgeted to decrease by 10.3% during FY14 from the revised estimates of FY13; is budgeted to increase by over 21.6% over the budget estimates of FY13. • For FY14, the gross tax receipts are budgeted to increase by 14.7% over FY13 (BE) and by 19.1% over FY13 (RE). • Government plans to generate 558.14 bn through disinvestments which is almost more than double the revised estimates of FY13 which is 240.00 bn.
  7. 7. Budget Financials
  8. 8. What’s in for Energy Sector? Power Announcement in Budget Implications Deduction under Section 80 –IA extended till 31st March 2015 Power generation companies are eligible for 100% deduction of the profits for 10 consecutive years during the first 15 years of operations. The benefit under this section was earlier available only until FY2013 which is extended till FY2015. This will be of a major advantage to project developers, as it will substantially reduce their tax burden. Positive Higher allocations projects This will see an increased investment in the energy projects and hence in power projects too Neutral This may give an impetus to have more investments in power equipment manufacturing market and OEM’s might increase the tune of investments Neutral to Energy Investment allowance of 15% for investment in plant & machinery Impact
  9. 9. What’s in for Energy Sector? Power Announcement in Budget Implications Impact 30% increase in plan expense This will see more number of projects coming up in power and other infra sector, a positive for OEM’s Positive CCI to take up decisions on more Power projects This will help remove the clearance bottlenecks and will speed the project commissioning provided if implemented shortly Neutral Power transmission system from Srinagar to Leh at an expense of INR 228 Crore in 2013-14 This will provide access of power to the people in remote areas of the northern part of country and also bring the surplus power from these regions to deficit regions Positive
  10. 10. What’s in for Energy Sector? Coal Announcement in Budget Implications Impact Differentiation of steam coal and Cost of imported thermal coal is expected to rise between bituminous coal removed. To Rs45 - Rs 75 per tonne. The cost of power generation will attract 2% custom duty and 2% CVD increase by 2 to 3 paise per unit. (Counter veiling duty) on import Negative PPP policy framework, with CIL as Indirect opening up the coal market. Competitive bidding and one of the partners, to increase the ease of clearances. production of coal Trading will open up partially Positive Focus on coal import, coal blending and price pooling of coal Neutral Ensure fuel supplies to run new power plants coming up by FY15. Imports to touch 185 MT by FY 17
  11. 11. What’s in for Energy Sector? Renewables Announcement in Budget Implications Impact GBI re-introduced in Wind Sector with allocation of 800 cr. The industry had pinned their hope on re-introduction of AD benefit as it helps in greater tax benefit. GBI will allow the developers to have some additional gains. Positive Low interest bearing funds from the National Clean Energy Fund (NCEF) to IREDA to on-lend to viable renewable energy projects. The scheme will have a life span of 5 years. NCEF (2010): INR 50/tonne cess; Corpus: INR 5000 crores. Soft loans @ 5-8% through IREDA will augur well for the small and medium segment investors to develop renewable energy projects. Positive
  12. 12. What’s in for Energy Sector? Oil & Gas Announcement in Budget Implications Impact Move to revenue-sharing from profit-sharing policy This will bring greater transparency Risk of producers in terms of not being able to recover their costs Neutral NELP blocks that were awarded but are stalled will be cleared Sends out a positive signal for the international investor community about government will to expedite on development of O&G blocks Neutral +ve Impact: Consumption of diesel rose just 0.24% and LPG only 0.31 % and petrol rose 8.7% in between Jan and Oct
  13. 13. Fiscal Budget: Oil & Gas Sector • Budget included some old wine proposals such as Dabhol LNG terminal and shale E&P policy • Natural gas pricing may benefit the domestic gas producers but again leaves a question mark at the level of comfort of power producers. • No clarity on subsidy sharing, relaxation or extension of tax holiday clauses, and exemptions from service tax.
  14. 14. Subsidies
  15. 15. Subsidies FY10 to FY14 3 F’s: Fuel, Fertilizer, Food account for 90% of subsidies 300000 250000 200000 Total Subsidy As % of GDP Food 150000 Fertilizer Petroleum Interest 100000 Others 50000 0 FY10 As % of GDP FY11 FY12 FY13BE FY13RE FY14BE 2.10% 2.10% 2.40% 1.90% 2.60% 2% FY14 RE: 9% more than BE
  16. 16. At the end, what matters is intentions to implement whatever has been planned which in turn requires strong administration. Hopefully there will be a change in the way our policies have been administered
  17. 17. THANK YOU