<div>With the target for Renewable Energy increased substantially to 1,75,000 MW by 2022 (including 1,00,000 MW from solar power; 60,000 MW from wind, 10,000 MW from biomass and 5,000 MW from small hydroelectric projects), the Budget, in a sense, reinforces the resolve of the government to push for clean and green energy. The increase in clean energy cess to Rs 200 per tonne of coal from the present Rs 100 per tonne will increase the tariff for thermal electricity by around 5 paise per unit, but would also double the resources in the national clean energy fund and provide additional impetus to the clean and green energy vision.<br /> <br /> The announcement of five ultra mega power projects of 4,000 MW each in plug-and-play mode, i.e., with all clearances in place pre-bidding, envisages a total investment of Rs 1 lakh crore. The move towards building larger projects, which bring in economies of scale, efficient fuel utilisation and faster capacity addition, is a step in the right direction. With pre-requisites like fuel, land and approvals in place, the development cycle of the projects will reduce considerably and will also lead to effective utilisation of existing natural resources as only what can be provided for will get planned.<br /> <br /> Another positive for renewable energy is the tax pass-through status considered for alternative investment funds in categories 1 and 2, and the clarity on General Anti-Avoidance Rules — that they will not be implemented with retrospective effect. A large portion of equity investment in renewable energy is expected to come from private equity capital, which is sourced from global markets. These clarifications are expected to provide a further impetus to private equity inflows into the sector.<br /> <br /> Tax-free bonds, which have been suggested for the roads, railways and irrigation sectors, could have been considered for the power sector as well. This could have helped reduce the cost of funds for institutions funding the power sector and the associated benefits could have, in turn, flowed to projects and eventually to end-consumers.<br /> <br /> With increase in service tax from 12.36 per cent to 14 per cent, the cost of third-party operation and maintenance for power projects (including renewable energy projects where the major operating cost is operation and maintenance expenses) may increase marginally and may prompt project developers to go for in-house operation and maintenance. Larger developers of projects in solar and small hydro domains are in any case engaged in operations and maintenance in-house. With economies of scale favouring larger developers, the size per project of renewable projects (wind and solar) is also expected to increase in coming quarters.<br /> <br /> Lots of projects are presently stuck because of fresh capital. Establishment of a national infrastructure fund with an initial corpus of Rs 20,000 crore from the government may provide some help to the sector. Overall, the Budget is quite positive for companies like ours — PTC India Financial Services — which are engaged in financing renewable projects within the power sector, as there will be a lot more projects coming up over the next few years. Also, with non-banking financial companies being brought into the ambit of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, the recovery process of NBFCs will become more robust and help us get better control over non-performing assets. <br /> <br /><em> The author is MD & CEO, PTC India Financial Services</em><br /> <br /> (This story was published in BW | Businessworld Issue Dated 23-03-2015)</div>