The Budget will be presented amid rather trying circumstances. The economy has slowed to just over 6 per cent from a high of over 8 per cent, the rupee has depreciated sharply, global energy prices are at an all-time high, and the IIP has been stagnant for some time. Under the circumstances, the necessity to increase subsidies, impose import duties to “protect” domestic manufacturing and postpone much-needed reform would seem urgent.

As to the power sector, the Budget should aim to evolve a comprehensive energy policy that would first ensure power to all and then address affordability; find a way to effectively address the challenge of being on the Concurrent List – by offering substantial incentives to States to reform – and clearly indicate that people will need to pay for the services they receive.

Commitment to reform

It is critical that distribution losses are reduced and tariffs increased to sustain financial viability of the power sector. The States will undoubtedly need the help of the Centre in getting their Electricity Boards out of the deep financial crisis that they are in. The Centre could provide this financial assistance in return for commitment to reform of the distribution sector.

The move to increase duties and taxes on manufacture/import of power generation equipment is completely contrary to the fundamental need to able to provide quality infrastructure at affordable prices. With primary energy prices already looming so high and with no sign of abatement in the near future, there is no case for further increasing power tariffs on account of additional duties and taxes.

The Government would do well to continue with policies such as extending benefits under Section 80IA of the Income Tax Act for at least another five years. This will further encourage infrastructure to be built, and that too at an affordable price point.

(The author is President & CEO, GE Energy, India.)

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