Budget Expectations

 Views of industry experts

With the covid-19 pandemic creating difficulties for the entire renewable energy sector value chain, the industry is hoping thatthe Union Budget 2021 will bring about a revival of growth in project development as well as equipment manufacturing. Industry experts share their expectations for the renewable energy sector and the impact on the overall industry…




Anish De, Partner and National Head, Energy and Natural Resources, KPMG in India

“The infrastructure sector, including energy infrastructure, should see significant directional signals coming in through the budget. Energy is the largest part of the National Infrastructure Pipeline (NIP). There is significant funding need in the sector that must be met for both new asset development across the value chain.  Simultaneously the sector finances, especially in power are precarious.  Accordingly, we do expect significant measures for enabling fund raise by entities like PFC and REC which are the principal lenders in the sector. Investment in capital gains bonds u/s 54EC – The present ceiling limit for making investment of capital gains in long term specified assets of INR 5 million could be raised substantially. There is also a hope in the industry of removal of applicability of section 94B (thin capitalisation rules) which limits on deduction of interest expense incurred by an Indian company or Indian PE of foreign company from a non-resident associated enterprise of such entity where such interest expense exceeds INR 10million.  Further, there is an expectation of increase of the set off period for losses beyond 8 years presently permitted since many energy projects – especially renewable energy – face losses in the initial years of operation due to front loaded costs.  Finally, there is an expectation that the companies availing the lower tax rates would be permitted to utilize the unused MAT credits.

Beyond the tax provisions I anticipate a push to privatisation of public sector companies, promotion of INVITs and enhancement of public private partnership (PPP) in the sector.  These initiatives have faced challenges, but Government appears determined to push ahead to unlock value and get in private capital.  Some of the barriers for expansion of PPP including the poor project preparation regime and dispute resolution may find a mention for evolving solutions to these unaddressed issues.”

Bharat Bhut, Co-Founder & Director, Goldi Solar

“We hope that the Union Budget 2021 offers clarity and immediate implementation of the basic customs duty on solar cells and modules. Subversions or supportive policy measures, incentives and financial support need to be provided to local suppliers to strengthen the auxiliary industry and eventually make the domestic solar industry and the ecosystem costcompetitive. It is also our hope that this will give a significant boost towards achieving an “Atmanirbhar Bharat”. The solar manufacturing industry is also eagerly awaiting the PLI (Production Linked Incentive) scheme for high-efficiency modules to come into effect.

Additionally, enthusiasm from both state and central governments are essential in giving the much-needed push for solarisation. If these policies are refined and implemented, we believe that the budget can prove instrumental in realizing India’s ambitious target of 450 GW by 2030.”

SK Gupta, Chief Financial Officer, Amp Energy India

“To give a boost to India’s solar industry, the budget should focus on addressing the challenges of investors and consumers and also giving a financial boost to make it future-ready. Government policies should, therefore, provide synergy to further expedite the growth of the industry by doing the following in the coming budget:

-Renewables to be covered under priority sector lending with competitive interest rates.

-Bid bond/PBG requirements to be removed from central and state bids as industry has matured.

-Provide positive synergy to renewable industry by removing anomalies in indirect tax laws and providing composite rate of GST at concessional 5%, expediting eligible refunds due under current inverted duty structure.

-Duty exemptions on import of modules to be extended to ensure demand supply mismatch is not there.”

RatulPuri, Chairman, Hindustan Power

“The government has taken multiple steps to make energy sector more mainstream and affordable. The upcoming Union Budget 2021 should focus on structural reforms required in the sector and expansion of public-private partnership as a key mode for expanding infrastructure development. The upcoming Budget should also focus on areas such as import duties, taxation, R&D, technology and affordability etc. for it to assume long-term significance. There is a massive need for resilience planning in the power sector to manage and mitigate the impact of an event such as COVID in the future.”


Hartek Singh, CMD, Hartek Group

“The Finance Minister should put into place a comprehensive policy and regulatory framework to encourage firms to invest more in innovation and technology with the larger objective of bringing about a transformation in the power sector. The skewed tariffs of downstream distribution utilities should be rationalised vis-à-vis the cost structure to optimise cross-subsidy and create competitiveness in the industry. Measures to facilitate timely payments from states to upstream utilities will take care of cash flow constraints. We also expect the Finance Minister to incentivise investments in R&D in renewables and storage technologies. The government should create a robust ecosystem for indigenous solar manufacturing through allocation of more funds, extension of financial assistance on term loans, upfront central financial assistance on CAPEX and exemptions in basic custom duty to units in Special Economic Zones to realise its vision of Atmanirbhar Bharat. It should create a separate category for renewable energy under priority sector lending to enable independent power producers to get more funding from banks. Let us capitalise on the Indian Renewable Energy Development Agency further and create a specialised infrastructure funding institution which can refinance operating assets at competitive rates.”

Saibaba Vutukuri, CEO, Vikram Solar

“As we inch towards the Union Budget, we are hopeful of targeted initiatives and policies for scaling-up the domestic solar manufacturing aligned to the 450 GW renewables by 2030 target.  There is an immediate need to build a robust eco-system for indigenous solar manufacturing and making it cost-competitive to achieve the Government’s vision of Aatmanirbhar Bharat.

We need a comprehensive policy framework encompassing both tariff and non-tariff barriers, long term financial support and direct incentives to make the domestic solar industry cost competitive. The finance ministry should consider 5% Interest Subvention on term loan and working capital, upfront Central Financial Assistance of 30% on CAPEX, increase export incentive from 2% to 8% under Remission of Duties or Taxes on Export Product (RoDTEP) which will aid indigenous solar manufacturing.

Further, the industry awaits the implementation of Basic custom duty (BCD) with exemption to Special Economic Zone (SEZ) based solar manufacturers and the Production Linked Incentive (PLI) scheme. In our view, bringing down Minimum Alternate Tax (MAT) for units operating in SEZs, extending Section 10 AA of Income Tax Act till 31st March 2022 for SEZ based solar manufacturing unit, preferred interest rate support and priority lending support for manufacturing units, availability of National clean energy fund (NCEF) for expanding solar R&D are critical to augment domestic solar manufacturing.

Additionally, we recommend, the government to consider implementing tariff barriers like BCD/safeguard duty/ADD for at least 4-5 years. Offering capital subsidy of 50% for setting up R&D and Quality testing infrastructure within the manufacturing units will help build scale. Also, super-deductions of 200% of the R&D expenditure for new and clean solar technology development should be allowed. India already offers super-deduction of 200% of the R&D expenditure in emerging areas such as biotechnology which has led to rapid growth of Indian biotech and pharma companies.

Considering the importance of electricvehicle(EV) battery ecosystem in a solar smart nation, we recommend special funds to be allocated for this development.

In our view, implementing these policy recommendations will not only encourage economic recovery amidst the pandemic, but will also provide an enabling eco-system to make India the global manufacturing hub for solar.”


Pratik Agarwal, Managing Director, Sterlite Power

“Towards the vision of ‘AtmaNirbhar India’ and building 450 GW RE by 2030, this budget should focus on investment into building transmission infrastructure for efficient carriage of renewable energy and Discom reforms to improve the overall financial health of the electricity value chain.”



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