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Like most sectors, tax breaks in various forms top the wish list of the power and renewable energy sector’s expectations from Finance Minister Arun Jaitley’s Budget.
The Independent Power Producers Association of India, which represents several thermal power producers, has sought an extension of the 10-year tax holidays given to power generation companies that fire up their plants by March 31, 2020.
The association says an extension is required to boost investments in the power sector, and it should include plants that start power generation by March 2020 as against 2017 as proposed earlier.
Further, the IPPAI has also said, “It is strongly recommended that the Minimum Alternate Tax (MAT) be reduced to 10 per cent and the entire provision of MAT re-examined to incentivise investments in the sector.”
The association has sought tax relief not just for generation projects. The IPPAI has also asked the Finance Ministry to consider granting infrastructure status to the power transmission and distribution sector to make it eligible for tax benefits available to other infrastructure sectors. “This would reduce the cost of power projects and per-unit tariff, which is ultimately borne by the consumers,” said a spokesperson of the association.
With the Central government’s focus primarily on renewable energy, the sector is expected to receive tax incentives. “Roll-out of geography-based tax incentives for renewable energy sources, similar to those for special economic zones, can be expected,” said Gokul Chaudhri, Leader, Direct Tax, BMR and Associates.
Sabyasachi Majumdar, Senior Vice-President and Co-head, Corporate Ratings at ICRA, also expects higher budgetary allocation to renewable energy sector for funding grants, viability gap support and initial project development expenses for the proposed ultra mega solar power projects. He also added that the government could extend the tax holiday beyond 2017.
Solar power equipment manufacturers expect a real thrust as the capacity starts to increase in the country.
“A technology upgradation fund, like in the textiles industry, should be introduced in the solar sector,” said Gyanesh Chaudhary, Chief Executive Officer and Managing Director of Vikram Solar.
Global players in the renewable energy space are also hoping for measures that would allow access to global equity funding. “We expect measures that would allow the solar industry in India access to global capital, as well as make available long-term debt financing for the significant upsurge in capacity building the country is witnessing,” said Sujoy Ghosh, Country Head-India of First Solar. “Specifically, we are seeking rationalising the dividend taxes for foreign investments and a removal of withholding taxes on bonds raised overseas for financing investments in solar projects.”
Solar power consultancy firm Bridge to India does not expect big announcements.
“Due to severe constraints on the government’s fiscal position, room for new expenditure, including spending on solar sector, seems limited,” it says.
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