Budget 2020 provisions for renewable energy sector

Power and renewable energy sectors have been allocated a sum of Rs 220 billion under the union budget for the year 2020-21, which was announced on February 1, 2020. The budget focussed on three key aspects – aspiration India, economic development for all, and building a caring society.

Under aspirational India, the allocation of Rs 10 billion was announced for expanding the Kisan Urja Suraksha evam Utthaan Mahabhiyan (KUSUM). As part of this, there is a proposal to provide help to 2 million farmers for setting up stand-alone solar pumps and for another 1.5 million farmers to solarise their grid-connected pump sets. In addition, a scheme to enable farmers to set up solar power generation capacity on their fallow or barren lands and to sell it to the grid would be operationalised. This will help in removing farmers’ dependence on diesel and kerosene, increase solar power deployment, decrease subsidy burden on government and supplement farmers’ revenues.

Under economic development, Rs 100 trillion is planned to be invested over the next 5 years for which the National Infrastructure Pipeline was launched on December 31, 2019. It consists of more than 6,500 projects across various sectors including access to clean and affordable energy. An allocation of Rs 220 billion has been proposed for power and renewable energy sector in 2020-21, which is a steep rise from previous year. Further reforms to facilitate transparent price discovery and ease of transactions in power sector are also being planned. The budget announcement also emphasised the financial stress of discoms and indicated that measures will be adopted to reform them, which will greatly help in alleviating developers’ concerns over payment dues. Government’s intent to promote prepaid smart meters was announced, which would give consumers the freedom to choose the supplier and rate as per their requirements. In addition, large solar power capacity is to be set up alongside rail tracks, on land owned by Indian Railways to further increase uptake of solar power.

As part of caring society, the budget proposed to advise the utilities to shut down the old thermal power plants with carbon emissions above the pre-set norms. This would also help in increasing uptake of renewable energy. Apart from these, in order to attract investment in the power sector, it has been proposed to extend the concessional corporate tax rate of 15 per cent to new domestic companies engaged in the generation of electricity. The removal of dividend distribution tax has also been proposed to make India a more attractive investment destination for foreign investors. Finally, it was also proposed that start-ups with turnover up to Rs 1 billion to enjoy 100 per cent deduction for three consecutive assessment years out of ten years, which would encourage more private sector participation in the renewable energy sector.



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