This document provides an overview and analysis of the implications of India's 2013-14 fiscal budget on the energy sector. It first discusses the backdrop and objectives of the fiscal budget. It then analyzes the budget from a macroeconomic perspective and fiscal arithmetic for 2014. Finally, it summarizes the key announcements and implications for the power, coal, renewables and oil/gas subsectors. Some of the positive impacts highlighted include tax incentives for power generation, higher allocations for energy projects, and funds for renewable energy projects. Challenges are also noted around rising coal costs and lack of clarity on some issues. Overall, effective implementation will determine the budget's actual impact.

1. Fiscal Budget:2013-14
IMPLICATIONS ON ENERGY SECTOR
Presented by
Group 4
Amistya Kumar
Hareesh Nalam
Raman Sharma
Saurav Shridhar
Tarini Prasad Sahoo

2. Agenda
• Fiscal Budget : Backdrop
• Fiscal Budget : Objective
• Fiscal Budget : A macro-economic perspective
• Fiscal Arithmetic for Financial Year 2014
• Fiscal Budget : What’s in for Energy Sector
• Power, Coal, Renewables, Oil & Gas Sector

3. Backdrop of Budget
• Slowing Global Economy
• Increasing Fiscal Deficit & CAD
• Dark shadow of Inflation
• Quest for sustainable and inclusive development
• Impending General Elections

4. Fiscal Budget : Objective
Taxation, Public Savings
& Private savings
Development
by effective
Mobilization
of Resources
Investment in Poverty
Alleviation Programmes
Efficient
allocation of
Financial
Resources
Reduction in
inequalities
of Income
and Wealth
Encourage
production
of
desirable goods and discourage
socially undesirable goods.
Facilitates the capital
formation
Reducing the
Deficit in the
Balance of
Payment
Increasing
National
Income
Imposing duties on
imports or by giving
subsidies to export.
Foreign
Exchange
Earnings
Encourage more
exports

5. Fiscal Budget 2013-14: A macro-economic perspective
• Finance minister has articulated a Fiscal Deficit (FD) target of 4.8% of GDP during FY14
• Total expenditure has been budgeted at 16,652.97 bn, a 16% increase as compared to
the revised estimates (RE) of FY13
• The budget estimates a higher collection of tax and non tax revenue
• Focus of the government towards increasing investment in infrastructure
• Measures would yield the desired results only on effective and timely execution

6. Fiscal Arithmetic for Financial Year 2014
• Reviving the economy on a sustainable growth remains a major challenge during FY14.
• The subsidy though budgeted to decrease by 10.3% during FY14 from the revised estimates of
FY13; is budgeted to increase by over 21.6% over the budget estimates of FY13.
• For FY14, the gross tax receipts are budgeted to increase by 14.7% over FY13 (BE) and by 19.1%
over FY13 (RE).
• Government plans to generate 558.14 bn through disinvestments which is almost more than
double the revised estimates of FY13 which is 240.00 bn.

7. Budget Financials

8. What’s in for Energy Sector?
Power
Announcement in Budget
Implications
Deduction under Section 80 –IA
extended till 31st March 2015
Power generation companies are eligible for 100%
deduction of the profits for 10 consecutive years during
the first 15 years of operations. The benefit under this
section was earlier available only until FY2013 which is
extended till FY2015. This will be of a major advantage to
project developers, as it will substantially reduce their tax
burden.
Positive
Higher allocations
projects
This will see an increased investment in the energy
projects and hence in power projects too
Neutral
This may give an impetus to have more investments in
power equipment manufacturing market and OEM’s might
increase the tune of investments
Neutral
to
Energy
Investment allowance of 15% for
investment in plant & machinery
Impact

9. What’s in for Energy Sector?
Power
Announcement in Budget
Implications
Impact
30% increase in plan expense
This will see more number of projects coming up in power
and other infra sector, a positive for OEM’s
Positive
CCI to take up decisions on more
Power projects
This will help remove the clearance bottlenecks and will
speed the project commissioning provided if implemented
shortly
Neutral
Power transmission system from
Srinagar to Leh at an expense of
INR 228 Crore in 2013-14
This will provide access of power to the people in remote
areas of the northern part of country and also bring the
surplus power from these regions to deficit regions
Positive

10. What’s in for Energy Sector?
Coal
Announcement in Budget
Implications
Impact
Differentiation of steam coal and
Cost of imported thermal coal is expected to rise between
bituminous coal removed. To
Rs45 - Rs 75 per tonne. The cost of power generation will
attract 2% custom duty and 2% CVD
increase by 2 to 3 paise per unit.
(Counter veiling duty) on import
Negative
PPP policy framework, with CIL as Indirect opening up the coal market. Competitive bidding and
one of the partners, to increase the ease of clearances.
production of coal
Trading will open up partially
Positive
Focus on coal import, coal blending
and price pooling of coal
Neutral
Ensure fuel supplies to run new power plants coming up by
FY15. Imports to touch 185 MT by FY 17

11. What’s in for Energy Sector?
Renewables
Announcement in Budget
Implications
Impact
GBI re-introduced in Wind Sector
with allocation of 800 cr.
The industry had pinned their hope on re-introduction of
AD benefit as it helps in greater tax benefit. GBI will allow
the developers to have some additional gains.
Positive
Low interest bearing funds from the
National Clean Energy Fund (NCEF)
to IREDA to on-lend to viable
renewable energy projects. The
scheme will have a life span of 5
years.
NCEF (2010): INR 50/tonne cess; Corpus: INR 5000 crores.
Soft loans @ 5-8% through IREDA will augur well for the
small and medium segment investors to develop
renewable energy projects.
Positive

12. What’s in for Energy Sector?
Oil & Gas
Announcement in Budget
Implications
Impact
Move to revenue-sharing from
profit-sharing policy
This will bring greater transparency
Risk of producers in terms of not being able to recover
their costs
Neutral
NELP blocks that were awarded but
are stalled will be cleared
Sends out a positive signal for the international investor
community about government will to expedite on
development of O&G blocks
Neutral
+ve Impact: Consumption of diesel rose just 0.24% and LPG only 0.31 % and petrol
rose 8.7% in between Jan and Oct

13. Fiscal Budget: Oil & Gas Sector
• Budget included some old wine proposals such as Dabhol LNG terminal and
shale E&P policy
• Natural gas pricing may benefit the domestic gas producers but again leaves a
question mark at the level of comfort of power producers.
• No clarity on subsidy sharing, relaxation or extension of tax holiday clauses,
and exemptions from service tax.

14. Subsidies

15. Subsidies FY10 to FY14
3 F’s: Fuel, Fertilizer, Food account for 90% of subsidies
300000
250000
200000
Total Subsidy
As % of GDP
Food
150000
Fertilizer
Petroleum
Interest
100000
Others
50000
0
FY10
As % of GDP
FY11
FY12
FY13BE
FY13RE
FY14BE
2.10%
2.10%
2.40%
1.90%
2.60%
2%
FY14 RE:
9% more than BE

16. At the end, what matters is intentions to implement whatever has
been planned which in turn requires strong administration.
Hopefully there will be a change in the way our policies have been
administered

17. THANK YOU