BUDGET - BMR Advisors

BUDGET EXPECTATIONS - POWERThe major expectations of the industry from the forthcomingbudget are outlined below:Exchange controlEasing of external commercial borrowings norms forRupee expendituresIn 2007, the RBI put an embargo on utilization of ECB in excessof USD 20 million for Rupee expenditure per borrower perfinancial year. Although, the RBI’s move was intended to curbthe unabated inflows of foreign debts causing sectoralimbalances in the economy, the move has however, resulted inunintended hardship to the infrastructure projects (includingseveral upcoming mega power projects) having huge Rupeecapital expenditures.To provide much needed fillip for growth of the power sector inthe country, it is expected that the ECB norms for Rupeeexpenditures may be eased for the eligible power projects.Income taxExtending tax holiday for undertaking engaged ingeneration and distribution of powerUnder the current regime, an undertaking engaged ingeneration, generation and distribution of power is eligible to a10 year tax holiday under provided the undertaking begins togenerate power any time before March 31, 2010.Keeping in perspective the planned allocation for the powersector in 11th Plan, huge investment is anticipated to beundertaken in the sector in year 2010 and 2011. Also, in view ofthe ever increasing thrust for growth of the sector, significantallocation of planned expenditure can be expected to spill over inthe 12th Plan as well.However, due to the sunset clause in the tax holiday provisions,future investment in this sector may not be eligible for tax holiday.To ensure the competitiveness of the sector, it is expected thatthe sunset clause of March 31, 2010 may be extended.indiaBUDGET200841