Budget 2018: Will Arun Jaitley meet power industry's Budget expectations?

PwC and Business Standard take a look at the key issues facing the power sector and the industry's expectations from Budget 2018

Worthy of attention ahead of Budget 2018 is the fact that the recent times have been very exciting for India’s power sector, especially with respect to the renewables segment. New generation capacity addition this year came predominantly from non-carbon sources – over 80% came from renewables, hydro and nuclear alone.

Here are a snapshot of the power sector and its expectations from the Union Budget 2018-19:

Key developments

• New generation capacity addition this year came predominantly from non-carbon sources (over 80% from renewables, hydro and nuclear). 
• The main renewable energy sources, wind and solar, are now contracted solely viaauctions. This hasdelivered record low tariffs (Rs 2.44 per kWh for solar).
• A roadmap was announced to procureabout 110 Gw renewable energy,over coming months up to 2020. This pipeline of tenders offers a big growth opportunity for manufacturers, investors, and developers. 
• New policies, from rural electrification to transport electrification, will reshape energy use and boost demand for electricity.

Key issues

• Lower margins in highly competitive auctions can deter new investments, while utilities may postpone signing new PPAs if tariffs go up. This Catch-22 situation can impair a healthy growth of the renewable energy industry. 
• Transmission connectivity is a fast-growing concern. Upcoming bids have fewer options of substations to which they can connect. That can drive up costs. 
• Distribution utilities facing pressures of competition must invest in new technologies to reduce operating costs and cut losses.
• Stranded assets and underperforming assets need not only financial resolution but also structural and regulatory reforms.

PwC Point of View

The year set the foundation for clean-energy-led growth and development across sectors, from rural households to urban transport. This will have a far-reaching impact on our energy market in the coming year.

Kameswara Rao Partner (Energy & Utilities), PwC India

Industry voice

Last year, various policy initiatives as part of ‘24X7 power to all’ were announced to ensure last-mile connectivity. Looking forward, India has an unprecedented 20 GW of solar energy to be integrated to the grid in 2018. These objectives can be met only by expeditious transmission planning and development. We urge the government to announce large transmission projects with a cumulative value of 20,000 ckm on PPP mode.

Pratik Agarwal, chief executive officer Sterlite Power