Expectations of the Electrical Equipment Industry from the Budget Belied : IEEMA
The Union Budget proposals announced today has belied the expectations of the domestic electrical equipment industry which was hoping for some corrective action from the Government to rev up the downward slide of the industry according to the Indian Electrical & Electronics Manufacturers’ Association (IEEMA).
Mr. Ramesh Chandak, President, IEEMA, stated that the slowdown in the power sector and escalating imports of electrical equipment, which have led to sharp deceleration in the growth of the domestic electrical equipment industry this financial year, have not been addressed. The power transmission and distribution sector has been largely ignored while the generation sector has received some attention.
None of the major demands of the industry, including service tax exemption for all power projects, duty free import of CRGO electrical steel (a critical raw material for manufacturing transformers), demand for a level playing field for domestic electrical equipment manufacturers vis-à-vis imports, have been acceded to according to Mr. Ramesh Chandak.
The hike in service tax and excise duty rates, will further impact the top-line and the bottom-line of electrical equipment manufacturers and consequently their commercial viability, who are already facing a crunch and working at broadly 65% of their production capacities.
Given the huge effort required in rural electrification, the fall in Central Plan allocation for Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY) from Rs. 6,000 crores (BE 2011-12) to Rs. 4,900 crores (BE 2012-13) is a matter of concern. Further, the revised estimates of Rs. 3,544 crores against the budget estimates for 2011-12 show that funds provided have not been fully utilised.
The entire power sector value chain crucially hinges on the financial viability of the power distribution sector and reduction of aggregate technical & commercial (AT&C) losses, close to 30% currently, is a national imperative. The Restructured Accelerated Power Development and Reforms Programme (R-APDRP), which is primarily focussed on reduction of AT&C losses, has seen a welcome hike in Central Plan allocation from Rs. 2,034 crores (BE 2011-12) to Rs. 3,114 crores (BE 2012-13), but here again the revised estimates for 2011-12 (Rs. 1,668 crores) show under-utilisation of allotted funds.
The additional Rs. 10,000 crores provision for tax free infrastructure bonds for the power sector, reduction of withholding tax from 20% to 5% on interest payments on external commercial borrowings for power sector, the extension of the sunset date by one year for power sector undertakings for claiming 100% deduction of profits for 10 years are some positive features of the Budget proposals.