India Budget
2020

What’s in for Energy & Infrastructure Segment
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Key Highlights

Amidst the lull witnessed by the power generation sector across last couple of fiscal, the intent to augment the supplies from Government has led industry navigate through the odds. To further embellish the procurement and demand of power we may witness complete or partial elimination of cross-subsidy surcharge (CSS), additional surcharge (AS) as well as other non-tariff hurdles impeding open access of electricity. This shall augur well for all industrial set up pushing up the demand segment thereby enthusing more pace to manufacturing segment as well.
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The government should is likely to give more importance to renewable energy by exempting solar and wind energy equipment and installations from the Goods and Service Tax (GST). A clear decisive is expected regards GST for solar projects. The Government should put forward finance schemes for the renewable energy sector at reduced rates of interest to make the cost of renewable energy more competitive.
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It is anticipated that the Government shall be bringing amendments to the EA 2003, so that the entire power market becomes more competitive and the woes of distribution sector is catered well. The implementation shall bring the open access to fore and is likely to benefit the power transactions better.
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The corporate tax rate especially for the smaller business unit felicitating the unorganized players at large is likely to remain at the same levels as was there for last year. Also, to aid the flag ship Make In India scheme the corporate tax rate for manufacturing units are expected to be lowered.
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The capacity addition plans for the energy & infrastructure segment is most likely to be at 2019 levels and any significant capacity addition plans may not be observed, apart from fillip to renewable segment. Some key announcements for mini & micro grid integration of solar power is anticipated at wider level and an enhanced adaptation of KUSUM scheme is also likely to be present.
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Government most likely shall push the disinvestment announcements following the issues of finances with PSU's under energy & infrastructure segment, which shall aid the players like IL&FS, BSNL, MTNL etc. Further, like in the banking sector the consolidation plan in E&I sector can also be bolstered in this year's budget.
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Taking cues from the very ethos of “success planning” eninrac through its dedicated team of sector consultants and industry specialist would be doing a round up on India Budget 2020-21 with live feeds, structured surveys and quality polls to offer unmatched point of view to all clients.

India Budget 2020 - Vision 2030 - Announcement
  1. To build next-gen infrastructure - physical as well as social - for a 10 trillion dollar economy and to provide.
  2. To build a Digital India that reaches every citizen, our youth will lead us in this, by creating innumerable startups and jobs.
  3. Clean and Green India - an India that drives electric vehicles, with renewables becoming major source of energy, bringing down import dependence and increasing energy security for our people
  4. Expanding rural industrialization using modern industrial technologies, based on MakeInIndia approach, using grassroot MSMEs and startups across the country
  5. Clean Rivers - with safe drinking water to all Indians, sustaining and nourishing life, using micro-irrigation techniques; long coastline can be pivotal for the economy, using strength of blue economy and SagarMala
  6. Oceans and coastlines is the sixth dimension
  7. India becoming launchpad of the world, placing an Indian astronaut in space by 2022
  8. Self-sufficiency in food and improving agricultural productivity with emphasis on organic food
  9. Healthy India, with distress-free and comprehensive wellness system for all is the ninth dimension of our vision for 2030
  10. Minimum Government, Maximum Governance with proactive, responsible and friendly bureaucracy, electronic governance
India Budget 2020 - Energy & Infrastructure - Announcement
  • INR 100 lakh crore would be invested over the next 5 years;
  • National Infrastructure Pipeline was launched on 31st December 2019 of INR 103 lakh crore. It consists of more than 6500 projects across sectors and is classified as per their size and stage of development;
  • INR 22,000 crore has already been provided as support to Infrastructure Pipeline;
  • Accelerated development of highways will be undertaken: This will include the development of 2500 Km access control highways, 9000 Km of economic corridors, 2000 Km of coastal and land port roads and 2000 Km of strategic highways;
  • Delhi-Mumbai Expressway and two other packages to be completed by 2023;
  • Chennai-Bengaluru Expressway to begin construction;
  • It is proposed to monetize at least 12 lots of highway bundles of over 6000 Km before 2024;
  • Indian Railways aims to achieve electrification of 27000 Km of tracks;
  • 148 Km long Bengaluru Suburban Transport Project at a cost of INR 18600 Crore proposed;
  • Government has commissioned 550 wi-fi facilities within 100 days of its office assumption;
  • Four station re-development projects and operation of 150 passenger trains would be done through PPP mode;
  • More Tejas type trains will connect iconic tourist destinations;
  • High-speed train between Mumbai to Ahmedabad would be actively pursued;
  • 100 more airports would be developed by 2024 to support UDAAN scheme;
  • Air fleet numbers expected to go up from the present 600 to 1200 during this time;
  • Allocation of INR 1.70 lakh crore proposed for transport Infrastructure in 2020-21;
  • Allocation of INR 22,000 crore proposed for power and renewable energy sector in 2020-21;
  • Expansion of the national gas grid from the present 16,200 km to 27,000 km proposed;
  • Concessional Tax Rate for Electricity Generation Companies: New provisions were introduced in September 2019, offering a concessional corporate tax rate of 15% to the newly incorporated domestic companies in the manufacturing sector which start manufacturing by 31st March, 2023. In order to attract investment in the power sector, it has been proposed to extend the concessional corporate tax rate of 15% to new domestic companies engaged in the generation of electricity;
  • National Logistics Policy to be introduced soon;
  • Setting up of a large Solar capacity alongside the Railway tracks on cards;
  • Thermal Power plants with emissions above prescribed limits will be asked close down;
  • Railways to start Kisan Rail with refrigerated coaches for milk, meat, fish etc.;
India Budget 2020 - Agriculture, Irrigation & Rural Development - Announcement
  • INR 2.83 lakh crore would be spent on Agriculture, Rural Development, Irrigation, and allied activities as farmers and rural poor continue to remain the key focus of the Government;
  • Government has already provided resilience for 6.11 crore farmers insured under PM Fasal Bima Yojana;
  • Agriculture credit target for the year 2020-21 has been set at INR 15 lakh crore;
  • All eligible beneficiaries of PM-KISAN will be covered under the KCC scheme;
  • Comprehensive measures will be taken for 100 water-stressed districts;
  • Proposal to expand PM-KUSUM to provide 20 lakh farmers for setting up stand-alone solar pumps and for another 15 lakh farmers to solarise their grid-connected pump sets, setting up of efficient warehouses at the block/taluk level;
  • Coverage of artificial insemination to be increased from the present 30% to 70%;
  • MNREGS to be dovetailed to develop fodder farms;
  • Doubling of milk processing capacity from 53.5 million MT to 108 million MT by 2025 to be facilitated;
  • Raising of fish production to 200 lakh tonnes is proposed by 2022-23;
  • Youth to be involved in fishery extension through 3477 Sagar Mitras and 500 Fish Farmer Producer Organisations;
  • Fishery exports hoped to be raised to INR 1 lakh crore by 2024-25;
  • Deen Dayal Antyodaya Yojana - for alleviation of poverty, half a crore households are mobilized with 58 lakh SHGs and it will be further expanded;
India Budget 2020 - Taxation - Announcements
  • To provide significant relief to the individual taxpayers and to simplify the Income-Tax law, the Finance Minister has proposed to bring a new and simplified personal income tax regime, wherein income tax rates will be significantly reduced for the individual taxpayers who forego certain deductions and exemptions;
  • The proposed changes in tax slabs are listed in the following table:
Taxable Income Slab (INR) Existing Tax Rates New Tax Rates
0 - 2.5 Lakh Exempt Exempt
2.5 - 5 Lakh Exempt Exempt
5 - 7.5 Lakh 20% 10%
7.5 - 10 Lakh 20% 15%
10 - 12.5 Lakh 30% 20%
12.5 - 15 Lakh 30% 25%
Above 15 Lakh 30% 30%

 

  • The new tax regime shall be optional for taxpayers. An individual who is currently availing more deductions and exemption under the Income Tax Act may choose to avail them and continue to pay tax in the old regime;

  • The new personal income tax rates will entail an estimated revenue foregone of INR 40,000 crore per year. Measures have been initiated to pre-fill the income tax return so that an individual who opts for the new regime would need no assistance from an expert to file his return and pay income tax;

  • Currently, more than 100  exemptions and deductions of different nature are provided in the Income Tax Act., the government has removed around 70 of them in the new simplified regime. Remaining exemptions and deductions would also be reviewed and rationalized in the coming years, to further simplify the tax system and lower the tax rate;

  • Dividend Distribution Tax: To increase the attractiveness of the Indian Equity Market and to provide relief to a large class of investors, the Government has proposed to remove DDT, and adopt the classical system of dividend taxation, under which the companies would not be required to pay DDT. The dividend shall be taxed only in the hands of the recipients at their applicable rate;
  • To remove the cascading effect, the Government has proposed to allow a deduction for the dividend received by holding company from its subsidiary;
  • The removal of DDT will lead to an estimated annual revenue foregone of INR 25,000 crores;
  • Tax Concession for Foreign Investments: To incentivize investment by Sovereign Wealth Fund of foreign governments, the Government has proposed to grant 100% tax exemption to their interest, dividend and capital gains income in respect of the investment made in infrastructure and other notified sectors before 31st March, 2024 and with a minimum lock-in period of 3 years.
  • Start Ups: To give a boost to the start-up ecosystem, the Government has proposed to ease the burden of taxation on the employees by deferring the tax payment for five years or till they leave the company or when they sell their shares, whichever is earliest;
  • An eligible Start-up having turnover up to INR 25 crores is allowed a deduction of 100% on its profits for three consecutive assessment years out of seven years if the total turnover does not exceed INR 25 crores. The Government has proposed to increase this limit to INR 100 crores;
  • GST: A simplified GST return shall be implemented from the 1st April, 2020. It will make return filing simple with features like SMS based filing for nil return, return pre-filling, improved input tax credit flow, and overall simplification. Dynamic QR-code is proposed for consumer invoices. GST parameters will be captured when payment for purchases is made through the QR-code.
India Budget 2020 - New Economy - Announcements
  • A policy to enable the private sector to build Data Centre parks throughout the country will be brought out soon;
  • Fiber to the Home (FTTH) connections through Bharatnet will link 100,000-gram panchayats this year;
  • It is proposed to provide INR 6000 crore to Bharatnet program in 2020-21;
  • Measures proposed to benefit the Start-ups include a digital platform for seamless application and capture of IPRs, Knowledge Translation Clusters to be set up across different technology sectors including new and emerging areas;
  • For designing, fabrication, and validation of proof of concept, and further scaling up Technology Clusters, harboring testbeds and small scale manufacturing facilities to be established;
  • It is proposed to provide an outlay of INR 8000 crore over a period of five years for the National Mission on Quantum Technologies and Applications;
India Budget 2020 - Wellness, Water & Sanitation - Announcement
  • INR 69,000 crore is being provided for Health care including INR 6400 crores for Prime Minister Jan ArogyaYojana (PMJAY);
  • Under PM Jan ArogyaYojana (PMJAY), there are more than 20,000 empanelled hospitals more in Tier-2 and Tier-3 cities for poorer people;
  • Setting up hospitals in the PPP mode mainly in  Aspirational Districts, using machine learning and AI, in the Ayushman Bharat scheme;
  • “TB Harega Desh Jeetega” campaign to end Tuberculosis by 2025;
  • Expansion of Jan Aushadhi Kendra Scheme to all districts offering 2000 medicines and 300 surgical by 2024 are some of the other wellness measures in the Budget;
  • On sanitation front, Government is committed to ODF Plus in order to sustain ODF behaviour and the total allocation for Swachh Bharat Mission is INR 12,300 crore in 2020-21;
  • INR 3.60 lakh crore approved for Jal Jeevan Mission;
Budget 2020-21 - Industry Expectations

At the time where overall economic growth has sharply dipped, can Budget 2020 do a formidable task of achieving a fine balance between addressing current slowdown and maintaining industries' expectations?

Budget 2020, is being presented at a time when the economy, Indian as well as Global, is showing signs of stress. India's expected GDP growth of 5 percent is the lowest in the past decade or so. Therefore, the upcoming Budget is an opportunity for the government to show it's intent to revive the slowing economy, triggering a boost in private investment as well as stimulate consumption and growth.

“India needs $1.4 trn infra spend in 2020-25 to become a $5 trn economy” 

To prevent 'lack of infrastructure' becoming a 'binding constraint' on the growth of the Indian economy that aspires to become a USD 5 trillion by 2024-25, the country needs to spend about USD 1.4 trillion on infrastructure. This is in line with the Government's spend over infrastructure sprucing, as the infrastructure expenditure has seen a jump of close to 3.5 times the 2013-14 levels to 2019-20. With blueprints of developing gas grids, water grids, i-ways (information ways), and regional airports are on cards, it is expected that the Government is keen on pushing in heavy investments in the sector.

Finances of state-owned power distribution companies have been gone for a burton. The UDAY scheme marked a serious effort to set things straight. Despite the initial promise, UDAY has not delivered the outcomes that the government desired, hence, the Government is likely to set the ball rolling for its ambitious ₹2.86-trillion scheme for power distribution reforms, with the introduction of a new program, making a renewed effort to heal the distribution sector.

Also, focus on renewables is unlikely to waver as FY 2019 has been full of challenges for the renewable sector and it is expected that the budget will provide a much-needed impetus to the sector, by exempting solar and wind energy equipment and installations from GST. Further, it is anticipated that the Government will build on its recent push towards sustainability, by prioritizing the growth of the EV ecosystem.

Hence, while the budget would always contain a range of direct measures affecting the energy and infrastructure sector, the greatest emphasis has to be on scaling up domestic manufacturing, creating new jobs and removing distortions that have prevented India from emerging as a strong economy in the past.

Budgetary Anticipation

Increasing NPA posing a threat to loans for utilities, however the steps to prevent NPA's are prudent & appreciable which might be a lasting effect upon banking systems. The banking system & public system banks anticipate capital funding which shall enable lending to energy & infrastructure segment.