Union Budget Special-2010

A full course meal for me please

If the economy has to grow at a steady pace, it will need a full diet of infrastructure development not an adrenaline shot. The government has repeatedly said that infra is a big priority and to its credit has followed it up with multiple big ticket projects. In this budget, the sector would expect more initiatives for sustainable infrastructure development.

Amongst its various demands, industry has been asking for a single window clearance for power and road projects so that regulatory formalities are addressed smoothly. Industry is expecting the tax holiday (Section 80-IB) of 7 years available to E&P companies be extended to 10 years. On similar lines undertakings that generate or distribute power are hoping to get an extension to the tax holiday, even if these activities are commenced after March 11, 2011.

Providing additional investment limit under Section 80C specifically for investment in infrastructure and power bonds could go a long way in raising domestic retail participation in infrastructure financing.  Power companies have been asking for excise duty exemption on power generation, transmission & distribution for all projects or at-least above 1,000 MW. Existing income tax exemption for power sector projects under section 80 IA which is expiring in March 2010 would hopefully be extended till March 2017. Currently, additional depreciation of 20% (WDV) under IT Act is available for investments in plant and machinery in industries other than power. Making this uniform would be a help to the sector.

Additionally, the sector would look for steps to reduce funding gap (almost Rs. 4,50,000 Cr shortfall) by further easing ECB norms so as to permit borrowing through automatic route. This could be a huge positive, though unlikely to happen due to the current high domestic liquidity situation, but no harm in asking!