Budget Reaction 2020

Views of industry experts

The Union Budget was announced on February 1, 2020, by the Finance Minister unveiling a series of far-reaching reforms, aimed at energising the Indian economy through a combination of measures including the proposed allocation of Rs 220 billion for power and renewable energy sectors in 2020-21. Industry experts share their reactions regarding the Union Budget and its impact on the overall renewable energy sector…

 

 

Sumant Sinha, Chairman and Managing Director, ReNew Power

“The Union Budget 2020 is a balanced and pragmatic statement of intent. Finance minister in her speech has attempted to address the trust deficit across a host of sectors. She has assured stock market investors by abolishing dividend distribution tax, addressed concerns of start-ups with respect to ESOPS and in the renewable energy sector through strengthening of contracts act and lowering of corporate tax rate for new energy companies. While there was pressure to move away from fiscal responsibility, the government has chosen to walk a middle path allowing for an acceptable increase in fiscal deficit while putting some extra money in the hands of tax payers.”    

 

Tulsi Tanti, Chairman, Indian Wind Turbine Manufacturers Association

The Budget 2020 is pro-growth, gives impetus for consumption, creation of infrastructure and encourages investments into Indian economy. It provides a boost to propel domestic consumption through – a) Income Tax sops for nearly 30 million income taxpayers; and b) Improved financial health of 120 million marginal farmers. The special focus on agriculture sector with a 16-point plan is very encouraging. The budget also gave a boost to ‘Make in India’ by focusing on manufacturing and enhancing infrastructure and rural digital connectivity. It is aligned to the objective of overall economic growth, nation building and job creation.

The renewable energy industry welcomes the government’s focus on clean energy being the major source of energy security for the country. The Finance Minister’s assertion to address discom issues is welcomed to tackle the financial stress in the system and help the renewable energy sector. The infusion of Rs 220 billion for the renewable energy sector is a major boost for clean energy growth and will help achieve the Prime Minister’s vision of 175 GW by 2022. Also, we hope that with the capital infused in the banking sector and banks coming out of PCA will help in infusing more funds to renewable energy projects.”

 

Rajiv Srivastava, Managing Director and CEO, Indian Energy Exchange (IEX)

“IEX welcomes the government’s move to expand the natural gas pipeline grid and introduce reforms for transparent price discovery of natural gas. The emphatic focus on gas and renewable energy in Budget 2020 will enable shift towards cleaner energy and, also deliver on our commitments under the Paris Climate Agreement.

At IEX, our priorities are aligned with the government. A few initiatives we plan to launch soon such as India’s first gas exchange, a green energy market, real time market in electricity and longer duration contracts will enable us to further the government’s energy agenda outlined in this budget”

 

Ashish Khanna, Managing Director and CEO, Tata Power Solar and President, Tata Power (Renewables)

“The Union Budget allocations are in the same direction that the Government of India has been supporting renewable for quite a long time now. The announcement that has been made by the government towards the KUSUM scheme is quite a positive step which will further help farmers to improve their livelihood through establishing solar pumps. Government’s decision to incentivise farmers to go solar and allowing farmers with barren land can set up solar power units will further help them to get a living out of it. Also, Government’s proposal to set up large solar power capacity alongside the railway tracks on the land owned by the Indian Railways is a positive step towards the renewable industry of the country.”

 

Sanjeev Aggarwal, Founder and CEO, Amplus Solar 

“The overall impetus on long term reforms in the power sector is very encouraging and it was noteworthy to note that India stands committed to its international sustainability commitments. The focus on bringing down the commercial losses in the distribution companies by mandating prepaid meters, coupled with the consumers having the choice of suppliers will surely resolve the long term viability issues of the power sector and lead to a vibrant electricity market. The usage of solar in railways and farming and usage of farmlands for solar plants will open up new entrepreneurial opportunities and will help in faster adoption of solar energy across the country.

We are also encouraged by the support extended to NBFCs and infrastructure funds that can improve much needed liquidity. Also, the slew of tax incentives offered to foreign investors for investments in priority sectors will boost inwards equity flow in the infrastructure sectors.”

 

Saif Dhorajiwala, Co-Founder and Executive Director, Fourth Partner Energy

“The Rs 200 billion corpus dedicated to the renewable energy sector to tackle climate change and pollution, announced in the union budget reflects India’s commitment and the urgency for transition to clean energy sources. We await further clarity on new schemes around smart meters and grid infrastructure.

The government’s intentions on solarising the Indian railways and expanding the KUSUM scheme to include 2 million farmers will give a good boost to solar power in the rural segment where the impact will be highest, as it will address the issues of energy access, energy affordability and climate in one stroke. Another key announcement made by the Finance Minister is the abolition of the Dividend Distribution Tax, which is a good move as it makes investments more attractive.”

 

Kushagra Nandan, Co-Founder, SunSource Energy

“Decarbonisation in one of the largest public-sector utility viz., Indian Railways, is a big boost to renewable energy sector especially rooftop solar segment and India’s commitment towards climate change. This compliments the decade long persistence of SunSource to develop solar projects in the country. $3.08 billion stimulus to boost India’s renewables sector is unprecedented and will surely yield strong business opportunity for key solar sector IPPs like SunSource. Reduced tax liabilities on the MSME sector combined with ongoing commitment to solar, will free up capital for solar sector capex and opex based projects”.

 

Ratul Puri, Chairman, Hindustan Power

“Power sector is central to India’s transition to low emissions development and is an integral part of the country’s development. The government’s proposed outlay of Rs 220 billion for power and renewable energy sector for Union Budget 2020-21 compared to Rs 158,740 million last year, is a welcome move which will surely take the Green India Mission to a new horizon. This showcases the government’s commitment to establish India as one of the global leaders in clean energy – a welcome direction as it will create employment, and cut India’s emission footprint.”

 

Anil Chaudhry, Zone President and Managing Director, Schneider Electric India 

“The Budget for FY2021 has affirmed its commitment to clean energy with a proposal to allocate Rs 220 billion for the renewable sector. The plan to provide standalone solar powered pumps to 2 million farmers allows them to generate solar power and set up large solar power capacity along the rail tracks, which will encourage the use of clean and renewable energy. Further, the decision to extend concessional corporate tax rate of 15 per cent to new power generating companies engaged will give a major boost to the renewable sector. Additionally, the focus on ensuring ‘smart metering’ replacing conventional energy meters by prepaid smart meters in the states and union territories over the next three years will prove to be a positive step in addressing the financial stress of discoms, if there is 100 percent compliance. This will also give users the right to choose their distributor and decide how much they want to pay.

The proposal to create 5 new smart cities with the states on a PPP model and attract Rs 100 trillion investment under National Infrastructure Pipeline (NIP) is also critical to boost overall economic growth. If rolled out well on the back of adequate funding, the NIP will be a potential game changer for the broad economy and have the ability to create thousands of jobs and revitalise ancillary industries.”

 

Kameswara Rao, Leader – Government Reforms and Infrastructure Development, PwC India

“The time-bound proposal to shift to pre-paid smart meters can truly help utilities improve cash collection as well as for consumers get a competitive power supply. This is, eventually, a positive for generators too who currently suffer delays of 6-8 months and are sitting on surplus capacity that could be sold if they had access to consumers.

Sovereign wealth funds with presence already in India’s renewables, hydro, transmission and distribution sectors will see the 100 per cent tax exemption on interest, dividend and capital gains as a huge positive. This, in addition to the corporate tax cut for power generators, should attract new investments, encourage early closure of inefficient plants and reduce marginal cost of generation.

The continued government focus on decentralised renewable energy, closure of inefficient plants, and a restatement of our commitment to climate change actions is encouraging. This should translate into real actions, especially given the Budget proposals to attract external funding.”

 

Sabyasachi Majumdar, Senior Vice-President and Group Head, Corporate Ratings, ICRA Ltd

“Measures to boost decentralised solar generation, including through solar pumps is likely to lower subsidy dependence for discoms and also provide demand boost to solar equipment and energy efficient pumps manufacturers. The proposal to boost coverage of prepaid smart meters over the next three-year period is expected to aid discoms in curtailing distribution losses; benefit consumers by providing flexibility to choose suppliers and rates; and provide demand boost to smart meter manufacturers. Shutting down of old thermal power plants will shift generation to newer generation thermal projects and thus, provide a moderate boost to their PLFs. Abolition of dividend distribution tax and lower tax rates will encourage fresh investments in the power sector, especially renewable energy and transmission sectors.”

 

Ranganath N. K, Area Managing Director, INDO Region, Grundfos

“We welcome this year’s budget which sharply focuses on issues that propels the growth of aspirational India. Addressing the challenges of severe water stress in the nation as one of its top most agenda, this budget gets to the bottom of things by proposing comprehensive measures for 100 water-stressed areas. Given that the budget also aims to empower famers by increasing their dependence on off-grid solutions with solarised grid-connected pumps through the PM Kusum Scheme, I think that this will act as a catalyst to sustainable irrigation solutions across the country. This abundant allocation in agriculture is likely to positively impact rural development.

We are greatly excited to see the budget allocation for Jal Jeevan Mission. Also the foreseen investment in the renewable energy sector will enable the government to achieve its national action plan on climate change.”

 

Jaideep N. Malaviya, Secretary General, Solar Thermal Federation of India

“The renewable energy budget which would hover around Rs 55 billion has seen almost a four-fold jump to Rs 220 billion, which is praiseworthy. However, a majority of it may go in supporting the ambitious stand-alone 2 million and 1.5 million grid-connected solar PV agricultural pumps. But a major announcement of milk processing capacity to be doubled to 108 tonnes from 53 tonnes by 2025 will increase the demand for heat energy and provides opportunity to explore solar thermal energy or any sustainable heating and create opportunities to entrepreneurs for manufacturing sustainable heating technologies.”

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