Union Budget 2017-18: Still a lot of ground to cover for energy sector

 The focus and commitment of this government on clean and renewable energy is clearly visible in this budget as well. r On a high level, it appears that the energy sector once again has not got the necessary impetus in the budget. Hon’ble Finance Minister noted the potential risk of rise in oil prices which could impact the fiscal deficit adversely given significant import dependence of our country. In line with the target to reduce oil import by 10% and increase utilisation of a cleaner fuel, there seems to be an effort towards promoting gas as an alternative source of energy by reducing the customs duty on import of LNG from 5 per cent to 2.5 per cent. Given the exclusion of oil and gas from GST, and adverse ripple impact to follow, it is a good move. The government continues to push the agenda of building healthy strategic crude reserves and the announcement of adding two more caverns for strategic crude storage in Rajasthan and Odisha, to increase strategic reserve capacity to 15.33 MMT.

  Pilot plants for environment friendly disposal of solid waste and conversion of biodegradable waste to energy are being set up at New Delhi and Jaipur railway stations. Setup of five more such solid waste management plants is also in the pipeline. Some of the tax related measures like reduction/exemption in BCD, CVD and Excise on certain renewable energy linked items (i.e. used for solar, wind or biomass generation) in order to compress adverse effects of exclusion of electricity from GST, has also been proposed. In line with the intent to reduce carbon emissions, the Government has proposed a reduced rate of 10 percent on sale of carbon credits. Further, streamlining of institutional arrangements for resolution of disputes in infrastructure related construction contracts, PPP and public utility contracts has been proposed to be instituted as part of the Arbitration and Conciliation Act 1996. An amendment Bill is proposed to be introduced in this regard. The budget could have provided for policy announcements with respect to supporting and strengthening of the transmission and distribution network for natural gas

 The energy sector could have been treated as an exemption in their quest of phasing out exemptions by continuing tax holidays and increasing the accelerated depreciation beyond 40 percent, considering the strategic need of this sector for a country like India, with increasing energy needs. On a whole, it seems that the cumulative result of the previous policies of the government seem to enable India to achieve the goals of energy security set. However, clarity with respect to GST applicability on the sector, along with additional incentives could have definitely made this otherwise risky and high investment driven sector, lucrative for investors.

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