No Big Announcements

Budget fails to address key sector issues

Compared to the massive support the renewable energy sector has been receiving from the government for the past couple of years, Union Budget 2017-18 has little to offer to the sector. Apart from the announcement of setting up 20 GW of solar parks, the budget had no major announcements for renewable energy development. As per industry experts, while the budget is positive at the macro level, it has failed to address the persistent issues facing the sector.

Key highlights

  • The overall budget allocation to the Ministry of New and Renewable Energy (MNRE) has been increased marginally, from Rs 50.63 billion in 2016-17 to Rs 54.73 billion in 2017-18.
  •  A major part of these funds has been allocated for solar energy development. While Rs 33.61 billion has been set aside for solar, only Rs 4.08 billion has been allocated for wind. This is indicative of the government’s focus on solar power development. Meanwhile, Rs 1.35 billion and Rs 760 million have been allocated to the small-hydro and bioenergy segments respectively.
  • The government has also announced Phase II of solar park development, under which it has proposed to support the development of 20 GW of capacity in solar parks
  • Investment in research and development and international cooperation has been scaled down from Rs 4.46 billion to Rs 1.44 billion. This is likely to impact technology development in the sector, which is at a stage where rapid innovations are needed to boost uptake.
  • Investment in the Indian Renewable Energy Development Agency has been reduced from Rs 91.1 million to Rs 80.4 billion, while that in the Solar Energy Corporation of India has been increased from Rs 1.73 billion to Rs 2.5 billion.
  • Notably, the energy storage segment has not received any allocation in the budget, even though the industry is excited about the potential benefits that storage offers for grid integration of renewables.
  • In order to help Indian Railways achieve its 1 GW solar target, the government has announced budgetary support for setting up solar power plants at 2,000 railway stations.
  •  There are no major incentives for domestic manufacturing, despite the industry lobbying for increased support.
  • Overall, the government has reiterated its decision to achieve 100 per cent rural electrification by March 2018. Renewable energy is expected to play a significant role in achieving this target.
  •  Other steps that are likely to impact the sector include import duty reduction for fuel cell-based power generating systems and balance of systems operating on biogas, which will help promote such technologies; import duty reduction for components such as solar-tempered glass, resin and catalysts used in cast components for wind energy equipment, which will reduce capital investments to some extent; and lowering of the corporate tax rate from 30 per cent to 25 per cent for companies with an annual turnover of Rs 500 million or less, which is expected to help microgrid enterprises, small manufacturers, etc.

Conclusion

The budget does not offer much to the renewable energy industry. While the government has shown its commitment to sector development time and again, a more proactive approach is needed for achieving the targets. Moreover, a number of ambiguities have been left unaddressed. The industry is still awaiting the government’s decision on whether large hydro would be included in renewable energy. In addition, there is still no clarity on how the goods and services tax (GST) will impact the renewable energy industry.

All in all, the union budget 2017-18 was a dampener as far as the renewable energy industry is concerned.

By Mridula Pandey

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