Indian power sector expects the government to continue its thrust on infrastructure and pins its hopes on incentives for the renewable energy sector and extension of sunset clause under Income Tax Act in the budget for 2011-12 to be tabled in parliament on 28 February. Under section 80-I(A) of the Income Tax Act mega power generation projects, with over 1,000 megawatts (MW) in case of thermal and over 500 MW in hydro, are exempted from income tax for 10 years, if they are commissioned before March 2011. The industry is, however, divided over the issue of levying customs duty on imported power equipment. The present power infrastructure of the country is inadequate to meet demand in an economy that has been growing more than 8 per cent over the past few years. The government has forecast a GDP growth of 8.6 per cent for 2010-11. The government's thrust, more off-budget than through budget, is to help the sector add generation capacities, discourage wastage, encourage generation of renewable energy, ensure supply of power equipment and facilitate rural electrification. However, analysts are suspicious of the government's ability to implement this agenda as speedier as it intends to. The government had cut capacity addition target for 2007-12 (Eleventh Five Year Plan) several times in the past year. "Overall, policy and regulatory framework for the sector has evolved over the last decade, now the industry expects more in terms of tax and other incentives," Charudatta Palekar, principal consultant, energy, utilities and mining, PricewaterhouseCoopers' said. Issues For 2011-12 Indian power equipment manufacturers have been demanding imposition of customs duty to ensure a level-playing field vis-a-vis foreign manufacturers, while power project developers have been lobbying against it on fears the move will dry up supply of cheaper equipment in the market. At present, there is no customs duty on equipment used for mega-power projects. The government is unlikely to change this given its plan to achieve capacity addition target faster, analysts said. Another issue is the import duty on power equipment spare parts. "A concessional rate of duty is applicable for import of power equipment, which is not being extended when I import spare parts," Issac George, Chief Financial Officer, GVK Power said, hilighting the concerns of power producers. That the power sector has no service tax exemption is an anomaly as other infrastructure segments such as roads, airports, railways, transport terminals, bridges, tunnels and dams are enjoying this benefit, industry officials said. In its pre-budget memorandum, the Indian Electrical & Electronics Manufacturers' Association (IEEMA) has sought to rectify this anomaly. The power equipment makers' body has also sought duty-free import of specialised steel, referred to as CRGO electrical steel, until indigenous production commences. CRGO steel, demand for which is estimated about 3.5 million tonnes per annum for the Twelfth Five Year Plan (2012-17), is a critical raw material for manufacturing transformers, IEEMA said. The companies are completely dependent on imports for this now. The 2010-11 budget had more than doubled fund allocation for the sectoral schemes and also extended, by one year, the sunset clause in the Income Tax Act. (Reuters)
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The Group of Ministers (GoM) to consider approval for a deal between Cairn and Vedanta Resources will meet on May 2, an oil ministry source said on Thursday.Vedanta is seeking to take control of Cairn's India unit in a deal worth up to $9.6 billion. But the deal has been delayed due to a dispute over royalty payments by Cairn India's partner, state-run Oil and Natural Gas Corp.Earlier this month, the matter was referred to a panel of ministers, headed by Finance Minister Pranab Mukherjee, which is expected to submit its recommendations to the cabinet for a final decision.(Reuters)
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The Indian company will hold a 40 per cent stake in the joint venture, a senior ABG official said on Tuesday.ABG Shipyard will provide technical expertise for the African venture and have management control for a period of 20 years, Chief Financial Officer Dhananjay Datar told Reuters."The timeline could be three or four years from now. We are the technical partner so there is unlikely to be a big investment from our side," he said over the telephone.The investment details were yet to be finalised as the discussions were in initial stages, but a majority of the investments would come from the private equity partners and the Nigerian government, Datar said.The unit will build large offshore and cargo vessels, Datar added.In February, the company had said it expects fresh orders worth up to 30 billion rupees in calendar 2011, the bulk of it from the booming offshore and defence sectors. It has also received government approval to foray into defence-related contracts.ABG Shipyard shares were up 0.83 per cent at 392.8 rupees in a weak Mumbai market.(Reuters)
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State-run Power Finance Corporation will launch its share sale on 10 May, four sources with direct knowledge of the matter said, in a deal that could raise up to $1.2 billion in the largest Indian equity issue this year.The follow-on issue will close on 12 May for institutional investors and a day later for retail bidders, the sources said, declining to be named as the information was not public yet. Power Finance executives were not immediately available for comment. Shares in Power Finance, which the market values at nearly $6 billion, rose as much as 3.7 per cent following the news on the timeline of the sale. The stock rose to 231.70 rupees in afternoon trade in the Mumbai market that was trading down more than 1 per cent. Power Finance, a lender to power projects, plans to sell 15 per cent in fresh equity shares while the Indian government will divest 5 per cent stake in the firm, the company has said in its prospectus filed with the regulators. The company will sell about 230 million shares through the offering, and plans to use the proceeds to boost its capital adequacy. The Power Finance issue is part of the Indian government's plan to raise $8.9 billion through share sales in public sector firms this fiscal year. Other state-run firms that are likely to launch share sales this year include explorer Oil & Natural Gas Corp, steelmaker Steel Authority of India Ltd and fuel retailer Indian Oil Corp. Goldman Sachs, Bank of America Merrill Lynch, JM Financial Services and ICICI Securities, a unit of India's second-largest lender ICICI Bank, are the bookrunners for the Power Finance issue.(Reuters)
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