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Tax sops a boon for power sector

July 07, 2009 14:50 IST

The power sector, which is in the midst of massive capacity expansions, will benefit from the extension of benefit U/s 80 IA of the Income Tax Act upto 31st March 2011.

Union Budget 2009-10 has been mildly positive for the power sector. The budget has provided for extension of sunset clause for tax holiday under section 80-IA of the Income tax act available for power generating unit as well as transmission and distribution companies upto March 31, 2011.

Budget provisions

Industry expectations not met

Stocks to watch

NTPC, Tata Power, CSES, GIPCL and Torrent Power.

Summary

Given the fact of extension of benefits upto March 31, 2011 that is the peak period where significantly large planned generation capacity is scheduled to commence operation is a welcome measure for the power sector. However the budget has not provided for other core demands of the industry such as refinancing of existing rupee loans ECB should be allowed for infrastructure sector as well as withholding tax exemption etc.

Though increase in MAT is to affect the cash flow of the companies especially the infra developers, on overall basis the Union Budget 2009-10 is a positive one for the power sector.

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