Budget Review

Union Budget 2019: A fine print on RE

Union Budget 2019 is out! Vision 2030 elaborates the government’s focus on key sectors, that should help India transform into a global power – physical infrastructure, clean & green India, rural industrialisation are some of the key work areas. Let us have a look at what the industry peeps think about it!

We are elated at renewable energy being a key dimension in the government’s vision for the coming decade, as proposed in the Interim Budget, with specific focus on electric vehicles and energy storage solutions. We see solar energy being an integral support pillar to the Pradhan Mantri Saubhagya Yojna, which aims at making electricity accessible to all. We applaud the government’s 2030 vision of reduced dependencies on foreign entities for fossil fuel and believe that given a sustainable ecosystem for domestic solar manufacturers, solar energy will be a prime source of energy. This will reduce imports, and strengthen the rupee denomination and contribute to the nation’s GDP.

The off-grid solar industry has provided clean energy to more than 2.5 crore individuals in India over the last year, resulting in dramatic improvements in household savings, increased productivity for small businesses and additional study-time for children. We are disappointed with the 35 per cent reduction in the amount allocated for off-grid solar and decentralised power in 2018-19 as it overlooks the major impact the sector has created. Today, people can choose to power appliances in ways other than grid sources and we believe that it is important for customers to have more choices when it comes to options for energy access.

It is heartening to see the budget clearly outline the priority areas as part of the broad vision for the future, with sustainable use of energy at the core of that plan. The focus on renewables is evident with electric vehicles being one of the ten dimensions for building New India by 2030. If concerted steps are taken in this direction, it will go a long way in bringing down pollution levels addressing the issue of climate change.The government’s decision to set up National Centre on Artificial Intelligence will allow sectors across the economy to draw benefits from this new age technology, boost manufacturing, trim production losses and usher in efficiency.

While demand for power is expected to grow by 6-7 per cent this year, the sector faces long-term challenges. Among the most significant are DISCOMs not honouring high-tariff renewable power purchase agreements (PPAs) and also refraining from signing fresh thermal PPAs.The budget alone cannot address these deep-seated challenges, but we would welcome measures, which will facilitate growth and investment in the power generation and distribution sectors. Fiscal measures to encourage independent power producers to sign long-term PPAs for renewable and thermal power would be a good step. The government had made some welcome comments about the need for gas to play a bigger role in our energy feedstock mix. Measures could include bringing natural gas within the purview of the GST and putting liquified natural gas (LNG) imports on a par with crude oil imports by removing the 2.5 per cent duty on LNG.

The interim budget gave a boost to ‘Make in India’ by focusing on manufacturing and enhancing infrastructure and rural connectivity. The RE industry welcomes the government’s focus on clean energy being the major source of energy security for the country. Prime Minister’s mission of bringing an electric vehicle revolution to India by 2030, where renewable energy will be used to power EVs to tackle the issue of climate change is a great initiative and will boost the clean energy market. We hope that with the capital infused in the banking sector and banks coming out of PCA will help in infusing more funds to renewable energy projects. Overall, measures on ease of living, job creation, encourage consumption, digital, clean and green India, it is definitely a well thought out budget.

For the second year in a row, solar was a no-show at the 2019 Interim Union Budget, apart from a sole mention about the installed solar generation capacity addition in the past five years. While prices for solar have continued to drop, it’s the lack of financing for solar projects that have hit the industry hard. This year’s budget has missed addressing that yet again. We have been demanding solar loans to be treated like home loans, as an instrument for individuals to claim a tax rebate. But, it seems like the industry will have to wait. There is some indirect relief to MSME units registered with the GST in the form of 2 per cent interest rebate on fresh or incremental loans up to `1 crore. This may incentivise some of these MSMEs to utilise this facility to install solar systems and reducing energy bills. Overall, it’s a very positive budget for the farmers, the middle class and the small traders/industries, with an eye on the upcoming general elections.

It is good to see that renewable energy remains a priority for the government and has been prominently highlighted in India’s 2030 Vision. Electric vehicles have also been brought into focus. What we will wait to see is finer print on the renewable industry like uniformity in policies, imposition of duties, ease of financing etc. to reduce dependency on non-renewable energy resources, thereby fuelling adoption of renewable energy. For electric vehicles to be a norm of the future, policies should include how EVs can be powered by renewable energy. While the budget has confirmed the role of renewables in its vision of clean and green India, and states have started showing enthusiasm in adoption, a long term road map will be expected by the industry.

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