Finance Bill: Positive for Private Power Producers

Finance Bill has removed the 2014 time bar it had earlier proposed on the duty exemption for imported thermal coal; Positive for private power producers like Tata Power, Adani Power etc.
In its earlier Budget proposals, the finance ministry had sought to exempt thermal coal from the basic customs duty of 5% and the concessional countervailing duty of 1% till March 31, 2014. However, the Finance Bill passed by the Lok Sabha has removed the 2014 time bar it had earlier proposed on the duty exemption for imported thermal coal. The exemption with the time bar of 2014 was also extended to natural gas and liquefied natural gas (LNG), uranium concentrate and sintered uranium dioxide in natural and pellet forms. However, the final Bill removed the time bar for coal; it stays for natural gas, LNG and uranium derivatives. The decision to extend the timeline was mainly because two years was a small period for setting up a power plant.
State electricity boards (SEBs) loans restructuring likely on the cards; positive in short to medium term for power sector and negative for banks. 

As per media reports, the Planning Commission has proposed a one-shot restructuring of the SEB’s which is likely to help the entire power sector. State electricity boards (SEBs) have loans of ~Rs 800bn. The proposal is to distribute the restructuring burden among state governments, banks that have lent to the state power boards and the Centre. Under the plan formulated by a group under Planning Commission Member BK Chaturvedi, state governments will absorb 50% of the debt of power distribution companies and convert them into state government bonds. The plan needs to be agreed by all the parties which is likely to be opposed by majority and hence the Planning Commission have gone to the Prime Minister to get everyone to sit together and find a solution. If the proposal goes through we believe it will be positive for power sector and negative for banks in the short to medium term.