The Hindu Business Line : Wiring up the nation

Charging up
Section 80 (IA) benefit extended to 2010
Four ultra mega power projects to be awarded in 2006
Rural electrification targets increased
Backward integration into coal mining could increase competitiveness

ON HIGH voltage

The Budget further emphasises the need to enhance power capacities in the country, especially in the rural areas. The Government spend on rural electrification is expected to increase substantially. The number of villages to be electrified under the Rajiv Gandhi Grameen Vidyutikaran Yojana has been increased substantially from 10,000 in 2005-06 to 40,000.

NTPC and Reliance have already entered this segment. Others, too, can be expected to do so.

The extension of Section 80 (IA) benefit — tax deduction of profits for companies investing in power projects — up to 2010 sends a positive signal for attracting further investments, especially in generation, distribution, transmission, repairs and renewals.

Reservation of 20 billion tonnes of coal for captive mining by the power sector will assure fuel supply for the upcoming power projects. Backward integration into coal mining will give power companies better control on the fuel cost, which accounts for roughly 50 per cent of the costs. Companies such as NTPC can extract coal more efficiently and reduce costs.

This could enhance competitiveness immensely, as any savings on the fuel cost is to be passed on by way of lower tariffs. Access to the Rural Infrastructure Development Fund for projects under the public-private partnership model could further spur private participation.

The emphasis on non-conventional energy sources could improve prospects for Suzlon. Wind energy contributes to a major portion of the growth in this segment. In another development, the Government has narrowed investment options under Section 54 EC (providing for exception of long-term capital gains invested in certain infrastructure funding organisations) to only two companies, the National Highway Authority of India and Rural Electrification Corporation as against five earlier.

This augurs well for the rural electrification programme, as more funds might flow to REC and facilitate financing of rural electrification.

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