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  • Union Budget for Energy Sector 2018

    The Union Budget 2018 is just around the corner, and speculations are rife. The Finance Minister of India, Mr. Arun Jaitley, will be presenting the Annual Financial Statement, also known as the Union Budget, to the Parliament of India on 1 February 2018. Since the energy sector is one of the most important components of India’s infrastructure and economy, several reforms are expected within this sector in the Union Budget 2018-2019.

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    Reforms expected in the Energy Sector

    • The cess duty, for oil and gas production and exploration, is expected to be reduced to a figure between 8% - 10%, from the existing 20%.
    • Reforms made in the upcoming budget may comply companies that deal with gas distribution within various Indian cities to reduce the excise duty levied, if not completely exempt them.
    • LNG imports are expected to be exempted from paying customs duty, from the upcoming financial year onwards.
    • Companies that sell kerosene and LPG below current market prices are expected to be provided a subsidy.
    • This year’s budget is also expected to address start-up firms within the renewable energy sector in India. These companies are currently bringing innovations, break-through technologies, and disruptive concepts and ideas, and will likely be given a boost by the government.
    • Since the timely payments from electricity distribution companies in India (DISCOMs) has been an issue that went unaddressed in the previous year’s Union Budget, it is expected that this year’s budget will address this issue.
    • The solar industry, which reported significant growth in the last few years, has recently slowed down as a result of import duties, GST rates, and a sudden increase in module prices. Thus, it is expected that in this year, organised investments in this industry will be focussed upon and will receive a boost.
    • The bio-ethanol industry is expected to receive some financial backing, in the current budget.
    • Last financial year, the government announced that it is targeting an all-electric fleet by the year 2030. In order to achieve this mammoth goal, it is expected that the necessary provisions will be made in the current budget.
    • In order to promote sustainable development, it is expected that the government will use funds that have been generated from the National Clean Energy Fund to finance, at least in part, loans for various clean-energy initiatives.
    • One of the biggest threats to the energy sector is that natural gas, which is an eco-friendly fuel, has not been brought under the domain of the GST. It is expected that reforms will be put in place to bring it under the purview of GST, this coming fiscal year.

    The Bottom Line

    In the Union Budget 2017, the Finance Minister had announced several initiatives and measures to provide full electrification for thousands of villages and promote clean energy sources. The Union Budget 2016 also saw several measures being set in place to provide subsidies to the oil sector, electrify villages in India, produce gas from areas that are currently not tapped into, etc.

    Significant reorganisations and improvements are expected from the upcoming Budget 2018. The government is expected to introduce some long-awaited reforms within the energy sector to encourage investments from existing players within the country and also to attract investments from foreign investors.

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