Power Sector: Highlights And Reactions To Budget

Despite giving a major boost to the clean energy sector in terms of excise and customs cuts, there are still a lot of misses that the power experts expect the government could have met in the new budget proposals. India has set an ambitious target of adding 175 GW of renewable energy by 2022 which includes 100 GW of solar, 60 GW of wind, for which, however the momentum has been ongoing outside the budget. The minister announced 100 per cent electrification of villages will be completed by May 2018.

BW spoke to industry experts for their opinion on the Budget 2017:

Sumant Sinha, Chairman, Renew Power
On the renewable energy front no mention of GBI for the wind sector has been a disappointment. However, roll out of the second phase of solar development of another 20,000 MW will go a long way in cementing India's position in the global solar industry. With the Railways also going the solar route, it signifies a significant change towards the use of green and clean energy for one of the largest modes of transport in the country. The increase of 35% of expenditure allocation to rural electrification schemes shows extremely progressive thinking when keeping the long term target of meeting 100% electrification by 2018 in mind. All in all, it is a Budget that should revive demand, lead to greater industrial activity and thereby increase overall demand for energy as well

Tulsi Tanti, Chairman, Suzlon
This budget is expected to lead an inclusive growth with a clear focus to lift the rural economy and create the right infrastructure.With a special mention about the drive towards 100% electrification, the renewable industry was hopeful that there would be an announcement to support the achievement of the Government's RE target 175 GW, and long-term policy framework to achieve our INDCs and commitment made at COP-21 to reduce carbon emission to 30-35% by 2030. On manufacturing front, it is indeed encouraging that India is now ranked sixth globally. The budget promises a very robust forex reserve, with resilient domestic market, further capitalisation of PSU banks, and launch of trade infrastructure for export scheme (TIES), can truly position the 'Make in India' apart from establishing the country as a global hub for engineering goods.

Anil Sardana, Chairman, TATA Power
We commend the efforts that the government has undertaken to bring a positive structure into the economy by moving towards a policy based administration with an increased focus on digitisation. The government's commitment to rural electrification and the announcement of an additional 20,000 MW of solar target is a welcome step that gives a much needed boost to the renewable sector. However, we believe that for renewable sector to achieve its potential strengthening the Renewable Purchase Obligations (RPO) mechanism is essential and should be part of government's larger vision for renewable energy.

Santosh Kamath, Partner and Head of Renewables, KPMG in India
The push on Phase 2 of the national solar programme of 20,000 MW reiterates the Government's commitment to this sector. The move to expand solarising of the railway stations also sends an encouraging signal to rooftop and distributed solar. Overall, experts said the budget was a mixed bag for the energy sector. Research and ratings agency ICRA said the budget has several favourable proposals such as creation of two more strategic oil reserves projects, reduction in basic customs duty (BCD) on LNG and creation of an integrated oil PSU major.

Key Highlights:

Solar Energy
The basic customs duty on solar tempered glass for use in the manufacture of solar cells, panels and modules has been proposed to be removed completely. At present BCD (additional custom duty is charged in lieu of the excise duty duty applicable on similar goods manufactured and produced in India) of 5% is levied.

The government has cut the Countervailing Duty (CVD-Countervailing Duty (CVD) is an additional import duty charged on imported goods, by half on the parts and the raw materials used to manufacture solar tempered glass, from 6%-12.5%.

However, it is proposed to levy 6 per cent excise duty on solar tempered glass for use in solar photovoltaic cells/modules, solar power generating equipment or systems, flat plate solar collector, solar photovoltaic module and panel for water pumping and other applications. At present there is no excise duty on these materials.

Wind Energy
The BCD, CVD and Special Application Tax on resin and catalysts used in the manufacture of cast components for Wind Operated Energy Generators [WOEG] have been eased to give a push to wind power generation.

Fuel cell based power generation
The levies on the import of machinery, used for fuel cell based power generation have also been reduced in the Budget. The Annexure said reduced the BCD on the machinery from 7.5% - 10% to 5% while the cut was cut by half to 6% from the earlier 12.5%. However, this is subject to certain specified conditions.