Indian Renewable Energy Sector’s Expectations from the Union Budget 2018-19

Soaring Renewable Energy Dreams of the 21st Century India

In 2015, the Current Government revised the Renewable Energy Target to 175 GW. This assertion of Commitment towards Renewable Energy made the right noises across the world. To add to this, India’s Pledge to drive the share of Renewable Energy to 40% of the Total Energy Mix by 2022 earned laurels globally.

To Achieve these goals, the Indian Government needs to Pump money in this sector.

‘India will need $125 bn to fund renewables dream’

I came across an article today in Business Line* where Anand Kumar, secretary at the ministry of new and renewable energy, said investment of at least $125 billion would be needed.

We feel that the Union Budget can play an Important role to attract new investments, mitigate risks and increase performance efficiency of this sector. The Budget will be presented on 1st February, 2018 by Finance Minister Mr. Arun Jaitley.

Our Expectations from the Union Budget 2018-19 :- 

  1. Allocation of NCEF/NEF – The National Clean Energy Fund was introduced in the 2010-11 budget by then Finance Minister Mr. Pranab Mukherjee. The objective of this fund was to fund clean energy projects.It was renamed to National Environment Fund. Last year, Dr. Arunabha Ghosh and Kanika Chawla wrote in Livemint that the total cess collected (projected up to 31 March 2017) was a mammoth Rs54,336 crore, only Rs25,810 crore was transfered to NEF. Of this, under half (Rs12,427 crore) was spent on renewable energy projects.While nearly all of the budgetary allocation to renewables in 2017-18 was from NEF, the budget could have clarified the proportion of the cess that would be transferred to NEF. So what this budget needs is clarity on the allocation of funds from NEF.  A firm stand from the government on the allocation  of funds for the RE Sector will highlight India’s commitment to achieving the mammoth goal of 175 GW. If you go by a report published in Financial Express , 30% of the fund between 2015-17 has been allocated to Ganga Rejuvenation project.
  2. Revision of Accelerated Depreciation Policy– W.E.F 1st April, 2017, the accelerated depreciation was reduced from 80 % to 40%. A case study published by the International Institute for Sustainable Development reports that the Accelerated Depreciation Benefit played a major role in attracting private investment for Wind Energy in India and facilitated the entry of a new class of investors comprised of high net worth individuals (HNIs), corporations, and small and medium- sized enterprises.These investors have harnessed wind energy to meet their captive demand and also used it as an instrument to offset profits coming from other businesses. The report gives good insights on the limitations of the AD policy and recommends measures to make it relevant with the changing times. The AD policy sought to add capacity but did not penalise inefficiency and poor performance of plants. The new budget can consider reinstating the 80% AD policy to regain investor confidence but link it to performance and efficiency.
  3. Rooftop Solar Subsidy as a Housing Incentive – Many states in India in their Solar Policies have given great importance to Rooftop Solar as one of the avenues to reach the 2022 Renewable Energy Target. Dr. Arunabha Ghosh and Kanika Chawla have pointed out that While budgetary support was extended for housing infrastructure, no direct support was announced for rooftop solar.  Perhaps, the government can come out with a common rooftop solar capital subsidy for all the states and talk about it in the same breadth as they talk about affordable housing.This will not only give greater clarity on subsidies but will acquaint home owners and buyers with the options availed to them by the government if they embrace rooftop solar PV System.
  4. Rapid Installation of Solar Pumps The Current Govt had introduced ‘Solar Pumping Programme for Irrigation and Drinking Water‘ under which the govt. aims to install 10,00,000 Solar Pumps by 2020-21. As per the Shakti Sustainable Energy Foundation’s study conducted by KPMG, there are about 18 million pumps in the country which are connected with grid power. In addition there are about 7 million pumps running with diesel. The power consumed by agriculture sector is nearly 20% of installed power generation capacity in the country. More than 4 billion litre of diesel and 85 million tons of coal are thus consumed per annum to support water pumping for irrigation. Despite the power shortages, coal shortages and increasing trade deficit, the country cannot ignore this important sector in the view of food security. Saving of 9.4 billion liter of diesel over the life cycle of solar pumps is possible if 1 million diesel pumps are replaced with Solar Pumps.                  Replacing 15% of India’s irrigation pumps with solar pumps could build 20 GW of capacity, writes Dr. Arunabha Ghosh and Kanika Chawla. The Key here is upfront subsidies for farmers. However, this project to set up 1 Million Pumps  may alone cost 1.25 bn dollars as mentioned in a report published on CEEW ‘Solar pumps for Sustainable Irrigation’ ****

Sources :-

*http://www.thehindubusinessline.com/economy/policy/india-will-need-125-bn-to-fund-renewables-dream/article10038538.ece?ref=sliderNews
**http://www.livemint.com/Opinion/5A1IxEWKobkHUz1Ku7x6gO/Budget-2017-An-opportunity-lost-for-renewable-energy.html
***http://www.financialexpress.com/india-news/clean-energy-govt-is-moving-away-from-its-plan-by-diluting-the-national-clean-energy-fund/539013/
****http://ceew.in/pdf/CEEW-Solar-Pumps-Policy-Brief-1Sep15.pdf
*****https://www.iisd.org/sites/default/files/publications/india-accelerated-depreciation-policy-wind-energy-case-study.pdf

 

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