Budget Series 2017-18 #6 Impact on Energy & Power Sector

  By Ishan Kekre

Union Budget 2017-18 has been tabled. It has come as a mixed bag for power and energy sector. Major announcements have been made in areas of rural electrification, oil and gas industry and renewable energy, not much has been done for areas like thermal, nuclear and tidal energy.

Key Energizers:

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Apart from above initiatives, Arun Jaitley, the finance minister proposed to create a global colossal public sector “oil major” by merging Indian state oil companies. The finance minister also said that two more strategic crude oil reserves will be developed at Bikaner in Rajasthan and Chandikhole in Odisha to elevate the domestic reserves to 15 MT.

In areas of rural electrification, the government promised that its focus will be on 100% electrification of villages by May 2018. This was complemented by increasing the total allocation for Deen Dayal Upadhyay Gram Jyoti Yojana to ₹ 4,814 crores.

Some of the Misses:

  • No mention of thermal power and coal.
  • Economic Survey, released on Jan 31, had pointed out the difficulties being faced by the private power generation sector due to falling tariffs which are unlikely to rise in the short-term.
  • No relief in terms of corporate tax and minimum alternate tax (MAT) for the power sector.
  • Experts also flagged the lack of major provisions for hydro or nuclear energy.

Implications:

  • The reduction in import duty on solar tempered glass will improve cost efficiency in manufacturing of key solar equipment like solar cells, panels and modules and will enable companies to reduce capital costs, ultimately benefitting the consumer.
  • The new strategic oil reserves will ensure that there is enough oil reserves in case of any disruption in crude oil supplies to the country in the event of any geopolitical tension.

Solar energy, now with the help of government policies and the falling global prices, can compete on its own against other forms of energy.

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