“Transform, Energize and Clean India is the agenda set by the government for the country for 2017-18” Finance Minister Arun Jaitley said in his Budget 2017 speech.
While the cleaner part in the agenda stands for “Clean the country from the evils of corruption, black money and non transparent political funding”. Here we analyze the complete budget and share with you finer details that are likely to impact the clean energy sector in India.
We begin with the economic survey that was published on 31 January 2017. The survey merely highlights the key achievements of the Government in the sector, like the 14GW of capacity addition in grid connected renewable energy in the last two and half years, including 5.8GW from solar power and 7.04 GW from wind power. The survey fails to mention any proposal to reform the sector.
While the industry was cautious in its reaction as few of the measures announced in the Budget 2017 were commended at the same time many experts and leaders in the sector felt it as a ‘Lost Opportunity”. Below we examine the key announcements that were made by the FM for the renewable sector.
Compared to last year the allocation to the Ministry of New and Renewable Energy in Budget 2017 stands at Rs.5, 473 crore, which is miniscule 8.7% hike over Rs.5, 036 crore allocated in 2016. The budgeted allocation is further split between Rs.3, 361 crore for solar and only Rs.408 crore for wind.
The Budget announces the second phase of solar park development for 20GW capacity. Besides the FM also proposes to feed about 7,000 stations with solar power. A beginning in this regard has already been made in 300 stations and work is going to be undertaken for 2,000 railway stations as part of 1GW solar mission of the railways.
Boosting Make in India:
In an attempt to boost local manufacturing and support the Make in India program the FM has the following in his budged announcement.
The basic customs duty on solar tempered glass for use in the manufacture of solar cells, panels and modules has been removed completely. Earlier a BCD of 5% was levied. BCD is an additional custom duty charged in lieu of the excise duty applicable on similar goods manufactured and produced in India.
The FM has cut the Countervailing Duty (CVD) by half on the parts and the raw materials used to manufacture solar tempered glass to 6% from the existing 12.5%. Countervailing Duty (CVD) is an additional import duty charged on imported goods. Solar tempered glass is used in solar photovoltaic cells and modules, solar power generating equipment or system, flat plate solar collector, solar photovoltaic module and panel for water pumping and others.
Though the budgeted allocation for the wind sector is insignificant, the FM announces the following for the wind sector
The BCD, CVD and Special Application Tax on resin and catalysts used in the manufacture of cast components for Wind Operated Energy Generators [WOEG] have been eased to give a push to wind power generation. On these, BCD has been cut from 7.5% to 5%, CVD has been reduced to zero from 12.5%, a huge cut, and the SAD has been brought down to nil from 4%. Special Additional Duty (SAD) is levied on all imports.
In an attempt to foster the use of Fuel cell based Power Generation, the levies on the import of machinery used for fuel cell based power generation has been reduced to 11%. The excise duty on these items has been reduced to 6% from the existing 12.5%.
Similarly, it is proposed to reduce BCD, CVD and SAD of 30 per cent on all items of machinery required for balance of systems operating on biogas/bio-methane/ by-product hydrogen to 11 per cent. The budget has also proposed to reduce excise duty on these materials to 6 per cent from 12.5 per cent.
- The wind power sector had hoped for a revision of the generation based incentive (GBI) for wind generators which is expiring on 31 March.
- Smaller sums of Rs. 135 crore and Rs.76 Crore earmarked for small hydro and bio-power, respectively.
- Despite recent suggestions, large hydro remains outside the purview of renewable energy.
- No clarity on the utilization and role of National Environment Fund.
- No direct support for rooftop solar.
- No direct incentive to invest in capital expense for solar pumps.
- Financial support to SECI halved to Rs.50 crore.
- The budget fails to give impetus to technology development halving the allocation for R&D compared to last year.
- No allocation for energy storage.