BUDGET

2 16
India Budget Analysis
29th February 2016
www.enincon.com/budget-2016/

ENHANCED REFORMS & ACCELERATED IMPLEMENTATION IN FOCUS FOR INDIA BUDGET 2016

Executive Summary
India Budget 2016 , had enormous expectations in terms of renewed capital interests of investors in India coupled with
better and organized reforms for the common man as well. The challenge was massive and arguably the Budget 2016
almost lived upto the expectations. The opinion circles, however appear divided in the initial feedback upon same
marginally skewed towards positive.
Indeed there are positives for the energy & infrastructure domain, but as the theme was hinged towards accelerated
implementation of the already declared budgetary steps in the last fiscal the impetus on fresh announcements were
mostly reserved. Though, domestic gas availability which was an issue of concern for the country in terms both to harness
the domestic hydrocarbon resources and reduce the tune of imports. The Government, definitely has scored positive in
terms of declaring incentives for deep water exploration and developments in O&G sector.
Another, beneficiary was Nuclear Power business which would witness an increased tune of investments of ` 3,000 Crores
per annum which is a move targeted towards Governments commitment depicted at Paris Summit to reduce upon
emission's and present an example before the counterparts. The move to rechristen the Clean Energy Cess to Clean
Environment Cess is another indication of Governments concern on environmental issues with the same being doubled
at ` 400/Ton of coal from ` 200/Ton. This might lead to the enhancements in energy charge for power generation in turn
which would be a direct pass through to the consumers, however it would be a noteworthy fact to witness as to how
Discoms react to same since an endeavor is also on move to make them more accountable for power business in India.
Apart from this a series of boost in the three legs of power generation, transmission and distribution are likely to
continue with an accelerated pace and witness enhanced implementation.
The roads & highways sector would get an added boost and there are efforts in the right directions to enhance the
national connectivity following our largest Asian counterpart China. The allocations in rail & road have been highest so far
and is stipulated to streamline the lagging sector in terms of performance. Surprisingly, the budgetary allocations for
much anticipated defense sector was at 4.8% which was considered to be more given the Governments fillip on Make in
India. enincon consulting llp as leading firm has analyzed the repercussions & impacts of Budget 2016 on energy &
infrastructure segment to enable better understanding for clients.

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Oil & Gas Sector Budget Analysis

Budget 2016
Announcements

Incentivize Deep Sea &

Ultra Deepwater Projects

Calibrated market freedom

& predetermined market
price for landed fuel

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Sectoral
Repercussions
Will be a good step for the country to target
lower degree of hydrocarbons import. This would
lead to lowering of capital burden on the
Government as well as the companies
participating in entire value chain. The country
can further improve upon gas supplies to the
preliminary consuming sectors of power &
fertilizer. Also, this would rekindle the interests
of global majors in India pertaining the O&G
segment which could take the country to be self
sufficient in terms of energy needs in long-term
Another key initiative in order to promote
increased participation of both domestic and
foreign players in Indian Oil & Gas sector which
would remove barriers to entry in the eventuality
of huge risks in terms of returns on investments.
Also, the market would not form a cartel if the
prices would be pre-determined thereby the
dominance of handful of players will slowly wither
out in the country e&p exercise. This additionally
will boost Indias rank among chief hydrocarbon
producing countries

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Overall
Impact

Positive

Positive

Coal &Power Sector Budget Analysis

Budget 2016
Announcements

Sector Power
` 3,000 Investments
/Annum in Nuclear Power
for coming 15-20 years

Sector Power
` 31,000 additional
mobilization of funds from
agencies like PFC, IREDAE
etc.

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Sectoral
Repercussions
The risks associated in terms of developing a
nuclear power plant is well known post
Fukushima event. However, barring that tragedy
it would be safe to claim that Nuclear is fairly
secure source of power generation which is also
clean in nature with excellent capacity utilization.
India hopes to add more capacities in this front
signaling changes for business realms of OEMs &
turnkey EPC solutions providers at large from
conventional thermal power plants to nuclear
plants

Certain boost in terms of arranging funds for the

power sector funds. Would be apt for both large
solar project funding (both government scheme
projects as well as private projects) , rooftop and
conventional thermal power projects (typically for
bigger scale projects viz. UMPP scale) which was a
growing concern for the capacity additions.
However, power procurement is still a conundrum
which seeks its resolution through UDAY schema

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Overall
Impact

Neutrally Positive

Positive

Coal &Power Sector Budget Analysis

Budget 2016
Announcements

Sector Power
Service tax exemption on
rural electrification
programme

Sector Power
Clean energy cess to
witness a two fold increase
from INR 200/tonn to INR
400 /tonn

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Sectoral
Repercussions

A good initiative in terms of encouraging

investments for electrifying the rural India .
Moreover, the thought falls in sync with the
governments vision of providing power to all by
2019.

One of the biggest challenge which the Indian

power sector is facing as of now is ease in
financing. The two fold increase announced in the
clean energy cess would not only decrease the
confidence of new entrants into the power
generation business in India but might also
promote operational difficulties for the existing
ones. Thus, restricting the flow of funds into the
segment especially from private channels .

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Overall
Impact

Positive

Negative

Coal &Power Sector Budget Analysis

Budget 2016
Announcements

Sector Power
Make in India (MII)
initiative to witness
increased excise and
customs duty on Capital
Goods & Hardware market
in India

Sector Power & Coal

Ease of Doing Business IT
Enabled Government
Processes

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Sectoral
Repercussions
The impact on MII will increase the impetus on
secondary sector for the country thereby
decreasing the tune of imports. This additionally
would encourage foreign OEMs to set up
manufacturing plants in India to facilitate the
equipments consuming sectors of conventional
power & RE market. Also, it would set India as
preferred destination to transform as business
hubs for MNCs looking to capitalize the AsiaPacific regions

Positive in terms to reduce the bottlenecks and

enthuse transparency in the overall operations of
the Government Departments aiding beneficiaries
with minimal capex upon same.

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Overall
Impact

Positive

Positive

Coal &Power Sector Budget Analysis

Budget 2016
Announcements

Sector Power
ARCs to help distressed
assets

Sector Power
Banks & NBFCs to get
`1,00,000 Crore Funds in
FY 2016-17

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Sectoral
Repercussions

The setting up of Asset Reconstruction

Companies would enable the distressed power
assets to bail out and see a new horizon of
growth and positivity. Moreover, it would help
banks recover its bad debts thereby improving
their lending credibility to the future projects

Positive in terms for the small scale power

projects, typically solar roof top projects, biomass,
W2E projects etc. This would help states meet
their RPO targets as an extended repercussion

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Overall
Impact

Positive

Positive

Coal &Power Sector Budget Analysis

Budget 2016
Announcements
Sector Coal
Clean energy cess to witness
a two fold increase from INR
200/tonn to INR 400/ tonn

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Sectoral
Repercussions
Revenue sourcing of CIL and states practicing
mining activities shall certainly get a boost.
Additionally, the funds generated through this
clean energy cess could be further used for
developing the existing mining and other
infrastructure facets in the country.

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Overall
Impact

Positive

Infrastructure Sector Budget Analysis

Budget 2016
Announcements

Sector Roads & Highways

`1,00,000 Crore for stalled
projects investments
planned in FY 2016-17

Sector Roads & Highways

NH of 10,000 Kms & SH to
be upgraded to NH stands
at 50,000 Kms

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Sectoral
Repercussions

Though planned investments tenor is good, but

application matters as it would enable close to
100+ mega scale projects in the segment opened
as new avenues for market participants

Huge opportunities opened up for both private as

well private players to initiate projects on PPP
mode and better concession agreement to ensure
lower risk profile

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Overall
Impact

Neutrally Positive

Positive

Infrastructure Sector Budget Analysis

Budget 2016
Announcements

Sector Ports
Green Field Projects to be
throttled on east & west
coasts equally

Sector Ports
`800 Crores investment in
Waterways Project

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Sectoral
Repercussions

Definitive game changer for the logistics sector if

implemented to success. This would help the
country utilize the huge coastline better in terms
of cargo dispatch and enhanced TAT with
reduced time at ports

Though much more needs to be done on this

project, as subsequent Governments' have failed
to witness the better implementation upon same

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Overall
Impact

Neutrally Positive

Neutrally Positive

Infrastructure Sector Budget Analysis

Budget 2016
Announcements

Sector Aviation
160 airport & airstrips to
get `50-100 crores of fund
each

Sector Aviation
10 of 25 airports & airstrips
of AAI to be developed

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Sectoral
Repercussions

The investments would improve the situation for

remote area connectivity's however the tune of
investment might prove to less to improve the
domestic flight carriers and cargos

AAI needs to hit the peddle more on development

mode, as India lags far behind its developing
counter part China. Hence, need for more impetus
was required in this ambit

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Overall
Impact

Neutrally Negative

Negative

join the Future now

BUDGET
2

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