Carbon Tax Waiver May Pose Risk to India’s Renewable Energy Growth: GlobalData Study

With the coal power sector in India struggling for the last few years, the Indian government has proposed carbon tax waiver on coal which may pose significant risk to India's renewable energy sector growth, says GlobalData, a leading data and analytics company.

The waiver is an attempt to help finance pollution curbing equipment and alleviate significant debt levels in the power industry. As per the proposal, a waiver of Rs. 400 rupees/ton (US$5.61) of carbon tax would be given on the production and import of coal in India. The waiver would help project proponents of coal-fired plants to install pollution curbing equipment that would cut the emissions of sulfur dioxides.

Mohit Prasad, Project Manager at GlobalData, comments: “The power sector in India is mainly driven by non-renewable energy sector with coal contributing more than 55% of the country’s installed capacity. The waiver in carbon tax is likely to have a negative impact on the growth of renewable energy. The coal-based power sector, which had witnessed cancellations of projects and competitions from renewable sources after the cost of renewables in India, fell below that of coal, and gas-based power will now regain momentum.”  

As per GlobalData, the annual installations of coal-fired plants have dipped starting 2016 and the declining trend has continued till 2018. During the same period, however, solar PV installations have increased significantly, mainly driven by competitive auctions.