Renewable Budget 2017 - Not Clean Enough?

Was this Budget a big hit or a big miss for the renewable energy sector? Supportive in a way, big misses, not futuristic, steps ought to be undertaken outside the Budget 2017. These were the common sentiments echoed in the panel discussion brought together by BW Businessworld to scrutinise the Budget 2017, for the renewable sector, especially the unclean part of it.

Let us begin by evaluating the hits, as articulated by the top industry experts in this sector. "The budget was supportive in a way in terms of cleaning the debt structure. The cost might increase but the good part is the removal of the tax holiday, accelerated depreciation etc, which would bring all the players especially in solar to play on merit and not the externalities. That is a big hit", says Guru Inder Singh, Director, Amplus Energy Solutions.

Singh says that the solar sector works on its own but needs support with respect to reliable grid and also energy management including storage support. He raises an interesting question of the budget allocation to the solar of about Rs 3,361 crore has an unclear path, whether it would go to the developers or the downstream which will have different impact with the later having more of a multiplier effect.

"The decrease in the corporate tax rate for small businesses, the credit extension of MAT from 10 to 15 years is a good hit, where the duties get aligned especially for small manufacturers of solar components", according to Vinay Rustagi, MD, Bridge to India.

Now seeking the miss part of the budget, the common sentiment hints towards the fact that how less futuristic the budget was for the renewable energy sector especially on the grounds that 2016 was a fantastic year for renewable energy in the backdrop of 2015. Therefore it was imperative for the government to set ahead and lay the ground for 2017.

The Budget 2017 was more of regularisation of the already announced schemes in the sector and therefore an opportunity missed, according to Gagan Virmani, Founder CEO, Mysun. "The 20,000 MW announced has already being planned and forecasted. The government could have taken steps especially loans for the end consumers to make it easy to get solarised. The allocation announced for housing could have been innovated with rooftop solar. Measures like these could have made a difference".

Will the duty reduction help?

The reduction in the duties was a logical but in the schemes of things is very minor, says Rustagi. He explains how the government has been touting the Make in India scheme for a very long time. Bizarrely, the import duty on the components was much higher than the import duty on the finished products. All the projects were getting complete import duty waivers. Now by imposing high import duty on the components, the domestic manufacturers will be penalised. And in order to encourage the domestic manufacturers, they have rationalised the duties and aligned the same for both components and finished products.

Singh says the reduction in the countervailing duty would hardly have any impact, maybe around 5-10 paise on the cost of the total project. On the tariff side, no major change. "Ideally, the government should have brought some clarity on the GST. Today we are importing the modules at zero duty and have exemption on excise. The GST could have a major impact on the sector and we expected the government to give some clarification on the same, for us and the investors as well".

"Unfortunately or fortunately, we do not need subsidies because for most of the energy consumers who pay for the electricity, going solar is a financially viable investment", says Virmani.

No new initiatives were announced to leap frog the renewable from the current status to a higher growth build up to achieve the ambitious target", says Rustagi. As the volume of this sector grows and the renewable power becomes competitive, it was right for the government to withdraw all the concessions and sops. But at the same time to counterbalance that, the government needs to incentivise the investments in the smart grids and build up soft skills like quality, consumer awareness, according to Rustagi.