Budget 2023. Sectoral budget expectations: Power

With the Union Budget days away, all eyes are on what the Finance Minister will unveil for the country’s power sector, which plays a crucial role in serving the energy needs of the world’s fastest-growing economy. The industry expects a doubling of budget outlay for the segment, sops for energy storage systems, ramping up green energy transmission capex, and encouraging new sources of environmentally-friendly power source.

Increasing power demand, reducing distribution companies’ dues and announcements of renewable energy plans helped BSE Power Index gain nearly 26 per cent in the last year which was aided by the strong performance of stocks such as NTPC (34 per cent), Adani Power (200 per cent) and NHPC (28 per cent). It’s well-known that India has announced its ambitious plan of building 500 GW of non-fossil fuel capacity by 2030 so that the cleaner fuels can comprise 50 per cent of the country’s power mix.

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The Union Budget 2022-23 had focused on the twin agenda of power distribution reform and clean energy transition.

Easing of discom woes

Distribution is considered to be the weakest link for the power sector on account of its financial health. To aid state distribution companies in reducing their AT&C losses from 17 per cent in FY22 to 12-15 per cent in FY25 and to reduce average cost-revenue gap, the Power Ministry has proposed to double the outlay to ₹15,000 crore under the Revamped Distribution Sector scheme from ₹7,565 crore last year. The amount can help state discoms reduce their due to power generation companies and measures such as installing smart meters to improve distribution infrastructure. This can further help companies like NTPC, Adani Power and Tata Power, to whom state discoms owe.

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Focus on transmission capex

The 900 km long Pang-Kaithal (Haryana) green energy transmission corridor will evacuate renewable energy from UT of Ladakh. This will have an estimated total cost of ₹22,000-25,000 crore, including that for planned battery storage of 4000 Mwh capacity.

The Power Ministry has pushed for budgetary allocation towards green energy transmission lines and viability gap funding (subsidy) of around ₹ 3,500 crore for the battery storage system: around 40-50 per cent of the overall storage system cost. State-run Power Grid Corporation of India Ltd has been roped in to implement the project under a regulated tariff mechanism.

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Sops of green hydrogen

Recently, the government came out with an initial outlay of ₹19,744 crore for the National Green Hydrogen mission. The industry expects the PLI scheme to be included in the Budget for the domestic manufacturing of electrolysers used for green hydrogen production. NTPC, Thermax, ReNew Power, Linde India and L&T are a few power and capital goods companies who have announced their foray in green hydrogen space.

Similar incentives or umbrella policies might be provided in the Budget for storage systems in terms of battery and pumped hydro to enable round-the-clock power supply from renewable energy sources and to increase its cost-competitiveness.

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Duty tweaks

Other Budget expectations from some industry participants are the reintroduction of generation-based incentives for wind power developers along with a PLI-based incentive scheme for domestic manufacturing of wind turbines to recoup bleeding wind power space.

Basic customs duty along with PLI, though intended to promote domestic manufacturing of solar modules and cells, has reduced the pace of solar space. Sops such as concessional duty on the import of solar modules might be introduced in the Budget to help the sector till the time sufficient domestic module manufacturing capacity is made available.

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