Budget 2021: What Renewable Energy Industry Seeks from Finance Minister

In the economic growth of any country power sector plays a vital role, and is, therefore, considered as the backbone of the industrial and agricultural growth. Amidst the ongoing corona virus pandemic, voices have been raised globally for increasing shift towards green energy.

January 25, 2021. By Manu Tayal

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For the Covid-hit Indian economy, which is slowly on a recovery path, Finance Minister Nirmala Sitharaman promised for a ‘budget like never before’. This year the Union Budget 2021, slated to be tabled in Parliament on February 1, is expected to be an ‘extra-ordinary budget’ in ‘extra-ordinary times’, wherein there’s a pressure of boosting the economic activity, job creation, higher income generation, boosting investment etc despite higher government expenditure on Covid related activities.

In the economic growth of any country power sector plays a vital role, and is, therefore, considered as the backbone of the industrial and agricultural growth. Amidst the ongoing corona virus pandemic, voices have been raised globally for increasing shift towards green energy.

In 2020, the world committed a record USD 501.3 billion to decarbonisation, beating 2019 by 9 per cent despite the economic disruption caused by the Covid-19 pandemic, said the energy transition investment analysis conducted by BloombergNEF. However, India slipped 36 per cent to USD 6.2 billion in renewable energy capacity investment.

The data clearly hinted towards the severe downfall in the renewable energy capacity investment activity since the spread of corona virus in the country.

This is significant as Indian government has set ambitious target of 175 GW of renewable energy, including 100 GW from solar energy and out of this 40 GW from rooftop solar, by 2022. Although, government has taken several steps in order to provide support for the power and renewable energy sector amidst the pandemic, including promoting domestic manufacturing through ‘vocal for local’, AatmNirbhar Bharat initiatives etc.

Now, ahead of the FM Sitharaman’s Budget, which is going to be completely paperless for the first time since independence due to ongoing pandemic, power sector especially renewable energy stakeholders’ eye more relief for ‘Ease of doing Business’.

The wish list which we gathered from the power industry stakeholders include – investment for power transmission & distribution infrastructure, renewable energy, DISCOMs distress, financing for rooftop solar, clarity on tariffs, basic custom duty, PLI Scheme, export incentives among others.

Taking a cue from the FM Sitharaman’s ‘once-in-a-100-years’ budget promise, Vijay Chhibber, Director General of Electric Power Transmission Association (EPTA), talking to Energetica India, said “Budget 2021 is obviously expected to be a landmark budget, given the acute fiscal stress on account of COVID related expenditure on the one hand and the need for reviving growth through higher spend and capital investments in infrastructure under the framework of the National Infrastructure Pipeline. I am sure that the Government will look at all measures to identify new sources of revenue. In addition to disinvestments including privatization of DISCOMs, monetizing infrastructure assets including Transmission assets should be a focus area. The TOT model can help raise substantial resources which can be ploughed in for creation of new infrastructure assets. The current fiscal stress provides government with an opportunity to restructure priorities by providing greater “space” for private investments in infrastructure development generally, and Transmission in particular. This will free-up available public resources to be deployed for meeting the unavoidable and increasing demands in the Health, Education and Defence sectors.”  

While making a strong case for financing for rooftop solar, Yuvaraj Dinesh Babu Nithyanandam, Executive Director and Team Leader at Sustainable Partnership for Rooftop Solar Acceleration in Bharat (SUPRABHA-The World Bank SBI Initiative), shared with Energetica India, that “Indian Rooftop Solar Industry is looking forward to a harmonized regulations and policies across the country ably guided by the Central Government for its accelerated deployment given the current diverse environment. Pursuant to the expanded priority sector lending for renewables, another major expectation is that all the banks, NBFC and financing institutions launch standardized financing products for financing rooftop solar in all the sectors including residential sector. Stakeholders are eagerly waiting for a favourable amendment by the Ministry of Power on the Rights for the Consumers (Electricity) 2020 which limited net metering upto 10 kW.”

In-line with expectations of Dinesh Babu for rooftop solar, Jaideep N. Malaviya, Managing Director, Malaviya Solar Energy Consultancy, told to Energetica India that he expect, “Hon’ble Finance Minister to kindle the Solar City programme by reserving particular budget to encourage rooftop solar systems like solar power and solar water heaters. Concurrently, Ministry of New and Renewable Energy can set targets for Rooftop solar PV and solar water heaters in these Solar cities. The budget may be used for publicity for masses, awareness of DISCOM’s and capacity building workshops that will result in employment generation. This will boost industrial production.”

Focusing on supportive policy measures for distribution space, Jaideep Mukherji, CEO, Smart Power India, shared with Energetica India, that “I believe that the power sector could play a crucial role in India’s economic revival in the post-pandemic world. As the sector continues to recover from the pandemic shock, I would expect the Union Budget 2021-22 to propose supportive policy measures to address the existing systemic challenges, particularly in the distribution space. As a major link between the power generation sector and the last-mile consumer, the DISCOMs would require continued government support both in terms of policy action and necessary stimulus packages to build greater financial resilience and operational efficiency in the long run.

Hence, I expect strong policy measures and a higher allocation of funds for DISCOMs in the upcoming budget that can help the sector strengthen its existing infrastructure and adopt the best practices to improve power delivery to the un-served and under-served communities in the country.”

Adding to it, Manoj Gupta, VP-Solar and Waste to Energy Business, Fortum India, also wants some clarity on tariff and non-tariff concessions, Grand fathering clause etc and told to Energetica India “there is a policy impetus under the initiative of Atmanirbhar Bharat to promote domestic manufacturing of solar cells and modules, more clarity is required on policy measures for both tariff (such as basic customs duties) and non-tariff concessions. In addition, the clarity of compensation or safeguarding the ongoing solar projects through Grand fathering approach due to change in duties like safeguard or Basic custom duty on import of modules from China and other countries will bring more equity in the market for fast future growth of renewable energy sector.

Given that an overall progress in implementing various schemes announced by the Government to promote procurement of modules from domestic players is slow, it is critically necessary to implement such supportive measures for domestic players, until their scale and cost competitiveness improves against imports, particularly from China. While a liquidity relief scheme was announced in May 2020 to provide liquidity to state DISCOMs through state government guarantee-backed loans, it remains a short-term measure and the payments from few of the DISCOMs are still stuck up. So far, this scheme has been only partially implemented. An announcement of a higher budgetary allocation is expected towards strengthening of the distribution infrastructure, which will enable DISCOMs to improve their operational efficiencies.”

On boosting Make in India for domestic solar manufacturing industry and making India Inc globally competitive, Avinash Hiranandani, Global CEO & MD of RenewSys India, talking to Energetica India said, “the Ministry has been a great support, however for the industry to bounce back to pre-covid levels we will need their continued policy support and in its execution. The key policies that we look forward to are: Firstly, Basic Customs Duty – which once formalized will help Indian module manufacturers in planning long term investments; an Equalisation levy is also important to protect domestic manufacturers based in SEZ's from BCD. Secondly, Performance Linked Incentive (PLI) Scheme - with more fund allocation, and a separate amount earmarked for PV Cells, as the solar manufacturing industry by its nature is capital intensive. Lastly, Export Incentives - increasing the incentives at least to the tune of 8%.”

Expecting some financial stimulus, Neeraj Sharma, President & Managing Director of Wartsila India, told to Energetica India, “there need to be right impetus provided to the growth of our economy by providing favourable Direct and Indirect Tax policies, priority lending at cheaper rates, amongst other things. Once these are in place, economic benefits like making India $5 trillion economy by 2024-25 and emergence of new employment opportunities can be realised.”

While talking to Energetica India on creating a specialised infrastructure funding institution, Hartek Singh, CMD of Hartek Group, needs “comprehensive policy and regulatory framework to encourage firms to invest more in innovation and technology with the larger objective of bringing about a transformation in the power sector. The skewed tariffs of downstream distribution utilities should be rationalised vis-à-vis the cost structure to optimise cross-subsidy and create competitiveness in the industry. Measures to facilitate timely payments from states to upstream utilities will take care of cash flow constraints. We also expect the Finance Minister to incentivise investments in R&D in renew­ables and storage technologies. The government should create a robust ecosystem for indigenous solar manufacturing through allocation of more funds, extension of financial assistance on term loans, upfront central financial assistance on CAPEX and exemptions in BCD to units in SEZs to realise its vision of Atmanirbhar Bharat. It should create a separate category for RE under priority sector lending to enable IPPs to get more funding from banks. Let us capitalise on the Indian Renewable Energy Development Agency further and create a specialised infrastructure funding institution which can refinance operating assets at competitive rates.”

Agreeing on this, Manish Narula,  Senior Director - BD (India) & Sales Head (West/South), JinkoSolar, shared with Energetica India, “in this budget we expect certain support to IPP community by way of reduced duty burden to make Solar Tariff more sustainable and attractive. This will also make DISCOMs willingly come forward to sign pending PPAs/PSAs. In addition, Solar Manufacturing also needs a big push by way of supportive long term policy announcement.”

Adding to this wishlist, Yogesh Mudras, Managing Director, Informa Markets in India, shared with Energetica India that, “since, the renewable energy sector grew at a much-reduced pace last year due to the Covid pandemic, the focus needs to be on large scale reform in the sector, with privatization and competition being two key themes for the reform. Furthermore, higher allocation for rural electrification, development of renewable energy infrastructure, improving tariff competitiveness and policy thrust will be essential for capacity addition.”

While aligning with the government’s Make in India goals, Sunil Badesra, Director, Sungrow India, interacting with Energetica India, said “we would like to have favourable duty structure on finished goods and minimum import duties on raw materials to make our locally produced goods highly competitive in global markets. We are hopeful that the budget will have more for local manufacturers in the direction of an Aatmnirbhar Bharat in solar sector.”

Stressing on the need for building infrastructure for the Lithium Ion batteries, AK Shukla, Founder, Sanvaru Technology, discussed with Energetica India, “this budget should focus on investment into building infrastructure for Li-Ion battery, next gen energy storage system like Hydrogen fuel cells and energy efficient carriage of renewable energy and integration. Our urge to the government: Firstly, basic concessional import duty on Rechargeable Li-Ion cell/accumulators for manufacturing of Li-Ion batteries/battery packs should be restricted to 5% for next two financial years. Secondly, MSME with positive turnover should have a government support for setting up of R&D facility for advanced Li-Ion cells or other chemistry. Thirdly, Government should provide support system through an expert committee for Facilitation of easy qualitative finance and listing of well doing MSME’s to BSE and NSE by relaxation in fees and norms.”

On incentivising local manufacturing, Swapnil Jain, Director - Sales & Marketing, KSolare Energy, shared with Energetica India, “GOI should focus on building infra in India by supporting Indian players specially companies into inverter manufacturing like ours who is completely focusing to become self sustainable. Replicating previous policy of significant depreciation against investments towards renewable energy would further boost the prospects. Incentivising local manufacturing industry has been a long time due.”

In-line with other industry stakeholders, Nikhil Gupta, Business Head, Delta Solar Inverter Solutions, Delta Electronics India, said, “we hope this year budget should address how we should boost the domestic market to support vocal for local vision as together we lead towards Aatmnirbhar Bharat. The industry requires comprehensive policy framework encompassing tariff as well as non-tariff barriers, direct incentives and other benefits to make the industry more competitive. We are expecting the upcoming budget will focus on how the solar power industry can become more resilient contributing in India’s growth towards green economy.”

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