In the last fiscal, the renewable energy industry has had to face some degree of policy uncertainty along with a rapidly changing market scenario in the country. It is time for the government to clear out these ambiguities beginning February 1st.
The Union Budget 2018 is around the corner. As a vital component of a nation’s infrastructure, energy production is at the core of its economic progress. Over the decades, alongside its steady surge in all areas, India has managed to take significant leaps in exploring alternative sources of energy to meet the ever-expanding energy needs, across industries and households. Renewable energy, therefore, accounted for 18.37 per cent of the total installed power capacity in India in 2017.
Given the current pace of growth and economic activity in India, players in the renewable energy domain expect some forward-looking provisions for the benefit of the sector. Since this space is also riding strong tailwinds that are poised to promote longer-term growth in the country, the government must look at devising a plan to harness its full potential by way of an investment push.
To begin with, there should be a strong focus on organized investments in the solar industry which has witnessed tremendous growth in the last couple of years. Affirmative capital allocation towards creating solar parks and associated infrastructure and green corridors is particularly critical to achieve India’s ambitious renewable energy targets of adding 175 Gigawatt (GW) of renewable energy, including addition of 100 GW of solar power, by the year 2022. The growth in the solar sector has eased off the breakneck speed of recent years, as developers are reeling from slowdown in new project procurement, extra costs due to Goods and Services Tax (GST), import duties and unexpected increase in module prices.
Moreover, introducing an interest subvention scheme similar to Technology Upgradation Fund (TUF) in textiles will be instrumental for expanding the scope of domestic manufacturing. Providing subsidies on technology upgradation would encourage solar manufacturers to introduce state-of-the-art facilities to scale-up production, thus accelerating the scope of solar energy in the country.
With regards to the bio-ethanol space in India, the renewable energy sector optimistically awaits some significant financial support from the budget. Toward this, it is important to take cognizance of the fact that growth in the bio-fuel market will partly reduce import dependence on crude oil and encourage optimal use of other renewable energy resources. Through budgetary subsidies, domestic companies in the renewable energy segment will be encouraged to invest in bio-ethanol manufacturing facilities and remunerative 2G ethanol prices. Furthermore, capital allocation for creating co-operatives for aggregating bio-mass and bio-wastes would also be a welcome move in this year’s budget.
Last year, the Government of India set an ambitious vision to achieve an all-electric fleet by 2030. While the magnitude of the goal is bound to be overwhelming, appropriate budgetary provisions are required to set us on the path of making it achievable.
For starters, it is imperative to lay focus on building a support mechanism for private players through ensuring a provision for car manufacturers to produce their quota of Zero Emission Vehicles (ZEVs), like the Renewable Purchase Obligation (RPO) mechanism for power generators. Providing a cost advantage to domestic EV manufacturers through easing of the tax norms prevailing in the country as well as addressing the present mismatch on duties on Electric Vehicles or EV (12 per cent), charging infrastructure (28 per cent) and introducing a 5 per cent uniform tariff rate would be an impressive move. These steps will not only enable higher penetration of EVs in India but also catalyse the nation’s mobility paradigm.
In the last fiscal, the renewable energy industry has had to face some degree of policy uncertainty along with a rapidly changing market scenario in the country. It is time for the government to clear out these ambiguities beginning February 1st.
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About Sanjay Aggarwal
Sanjay Aggarwal is Managing Director at Fortum India and the Global head for Solar Power at Fortum. Before joining Fortum, he was Chief of Projects at Tata Power. With 29 years of experience in the power sector, Aggarwal has held leadership positions at Tata Motors, Thermax, ABB and Wartsila, too, in the past.
Source: energy.economictimes.indiatimes
