In a blog post published in January, we had discussed the expectations of the Renewable Energy Sector from the Union Budget 2018-19.On 1st February 2018, Mr. Arun Jaitley – India’s Finance Minister, presented the budget. We think that the budget is fairly average and non-committal as far as renewable energy sector is concerned. While, solar energy retains the focus that it has been getting over the last few years, wind and other forms of renewable energy stand neglected.
We will discuss the highlights of the budget and what it holds for the Indian Renewable Energy Industry:-
- DISCOMS/Licensees to purchase surplus electricity from farmers
The finance minister in his speech mentioned that state governments will be encouraged to place a mechanism, so that Surplus solar power is purchased from farmers by DISCOMs(or Licensees) at reasonable remunerative rates.
A report in downtoearth.org notes that the pioneer for this practice was a farmer in Thamna village of Anand district, who installed a solar power pump to save Rs 500 per day on diesel and managed to sell surplus power to a discom. The Solar Pumps are an empowering upgrade from electric and diesel pumps. Electric Pumps are unreliable as electricity cuts lend the farmers helpless, while diesel pumps are expensive and eat into the revenue of farmers. On the other hand, solar pumps require the farmer to pay just 10% of the cost upfront.
According to a report in Indian Express, the first solar cooperative of India, in Village Dhundi (MP), managed to sell 98000 units of surplus electricity to Madhya Gujarat Vij Company Ltd (MGVCL). This surplus electricity is worth a cool Rs 6.8 Lakhs. The solar panels were installed for facilitating irrigation and this diversion of electricity to the grid additionally prevented overdrawing of groundwater. It’s a win-win situation. During an interaction with Livemint, Mr. R.K. Singh, secretary MNRE, said that he foresees speedier credit of subsidies for DISCOMS in the near future.
- Elimination of custom duty on solar tempered glass
In January last week, we had discussed the pros and cons of DGS’s recommendation of a 70% safeguard duty on Chinese solar modules. This recommendation seeks to protect domestic manufactures from Chinese modules which were far cheaper and far more favoured by Solar Developers.Now, the budget 2018-19 has eliminated import duty on imported tempered glass which constitutes approx. 33% of the total cost of a solar module. The rollback of customs duty is expected to decrease the price of modules manufactured by domestic manufacturers. This move shows that the Indian Government wants the Indian Solar Manufacturers to be a part of the solar growth story. This decision is good news for Solar Developers too who were unhappy with the safeguard duty as it was a threat to their profitability.
- Budget outlay
We will quickly give you the numbers. The budget outlay for Wind Power (Grid Interactive) is 750 cr which is the same as the budget estimate for 2017-18. The budget notes state that the amount is for the past liability for GBI(Generation based incentive) Scheme, which has been discontinued from 1st April, 2017.For off-grid, the budget is Rs 7.5 crores with a comment which states that small wind energy & hybrid systems program is being discontinued from this financial year. The budget is required for clearing pending liabilities only. From what we understand, the government has not allocated any funds for new wind projects. Perhaps, along the year we will see an increase in expenditure on the wind industry.
The government hopes to add 11000 MW of solar power to the grid this year with a budget of Rs 2045.25 cr. We can give you more figures, however, the revised estimates always tell a different story. You can check the detailed outlay on page 103 of Indiabudget.nic here
It was most disappointing to see that the budget for Human Resource Development and Training under MNRE has been rolled back from 70 crores in 2017-18 to 60 crores in 2018-19. A major purpose of this scheme was to train Suryamitras.
OUR TAKEAWAY FROM THE UNION BUDGET 2018-19
The most interesting bit of the budget speech on 1st February was the government’s commitment to install more solar pumps in the country by way of making it a revenue-churning scheme for farmers. It is a noble thought and one hope works. The solar pumps are a big investment for farmers which makes it imperative for the state government to clearly specify a feed-in tariff. The Feed-in-tariff will prevent disputes and loss of revenue for farmers. The government should also streamline subsidies so that they reach the farmers as soon as possible. Our farmers are a stressed lot and it is time that the government does good to them by ensuring that the subsidies are credited on time.
Another interesting development was the elimination of custom duty on tempered glass imports used in solar modules. The government seeks to give a much needed impetus to solar manufacturers and developers by helping in producing cheaper modules to keep the solar momentum going.