Budget Expectation - Mr. K.N.Neelkant, COO of Avantha Power and Infrastructure Limited

Mr. K.N.Neelkant, COO of Avantha Power and Infrastructure Limited

Key highlights of budget expectations

- Open coal mining to private players
- Abolish MAT in the power and other infrastructure sectors
- Relax ECB norms for power sector
- ECB route should be completely liberalised for the power and infrastructure sectors
- Remove withholding tax on ECBs
- Reform the distribution segment
- Ensure periodic tariff revision, last mile reforms and execution of FRP for discoms

"I think any budget and this budget specifically has to take important strides to ensure "Government for Governance" and "Enterprise for Entrepreneurs". The country's crying need today is growth in core segments like Mining & Power. Apart from the usual "Disinvestment Proceeds" budgeted, there is a huge opportunity for the Government to auction dormant resources in the Mining Sector especially coal, thereby achieving operational efficiency in the natural resource space as well as mopping up some revenue through the proceeds. It makes eminent sense for the government to make some bold moves and throw open the coal sector to private mining, that in itself will take care of the distortions in the current coal monopoly system and a market determined pricing will flow from it.

The other aspect, I believe is to abolish MAT totally not just in the power sector but in all infrastructure sectors. With a MAT rate close to 20 pct, any tax holidays or other exemptions awarded to long gestation projects are negated because of MAT. If this tax is done away with, it will not just add to sentiment but will also positively impact margins, profitability and cash flows of power sector companies in India. This in itself will act as a booster to attract investments in the sector.

I think the government will also do well to review the existing financing norms in this sector, be it the high domestic rates plaguing the sector or restrictions on ECBs. Subject to overall forex control, the ECB route should be completely liberalised for the power and the infra sectors and end use, be it for refinancing or hedging should not be mandated. If the withholding tax on ECBs is removed, it will really help.

Another area that really needs a lot of political will to be cleaned up is the downstream distribution segment. Cities like Delhi and Kolkata have shown that it's possible for distribution to be profitable. For this to happen, the government must reduce cross subsidies in power, allow realistic and periodic tariff revisions, ensure last mile reform like metering, billing and open access and also follow through with vigour on the FRP which is in the process of being implemented.

If the budget helps with interventions in these areas, I have no doubt in my mind that the country's power sector will be on its way to becoming robust, vibrant and sustainable again".

Source : Equity Bulls

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