Budget 2020: For Renewable Energy, “The Devil is in the Detail”

The industry sentiment seems to be mixed about the 2020 budget


On February 1, 2020, when Finance Minister (FM) Nirmala Sitharaman announced the Budget for the financial year (FY) 2020-21, with a budget allocation ₹220 billion (~$3.08 billion) for the power and renewable sector.

The budget had announcements that can improve the industry sentiment in the coming months.  Mercom reached out to several stakeholders to understand what the industry thinks of the new budget.

Welcoming the government’s decision to reinforce the PM-KUSUM program, Pranav R Mehta, chairman of the National Solar Energy Federation of India (NSEFI), said, “We are very happy that the government has decided to reinforce the program with two million off-grid and 1.5 million on-grid solar pumps. While we always welcome the use of locally made modules in the country, the provision of using only domestically made cells in this program might be a deal-breaker due to the lack of adequate infrastructure”.

The government also proposed that a large solar capacity would be developed along the railway tracks on lands owned by the Indian Railways. It also aims to electrify 27,000 km of railway tracks.

“Government’s emphasis on using barren or fallow land for solar projects is also appreciated as at NSEFI. Along with Indo-German Energy Forum (IGEF), we are emphasizing proposing standards for agri-photovoltaic projects, which will aim at addressing both the targets of the government of India, doubling the farmer’s income as well as 100 GW of solar target by 2022,” said Mehta.

According to Kushagra Nandan, co-founder of SunSource Energy, decarbonization of one of the largest public-sector utilities, the Indian Railways, is a big boost to the renewable energy sector, especially rooftop segment and India’s commitment towards climate change.

“The $3.08 billion stimulus to boost India’s renewable sector is unprecedented and will surely yield strong business opportunity for key solar sector independent power producers (IPPs) like SunSource. “Reduced tax liabilities on the Micro, Small and Medium Enterprises (MSME) sector combined with an ongoing commitment to solar, will free up capital for solar sector Capex and Opex based projects,” he added.

Ranganath N. K, area managing director, INDO Region, Grundfos said, “We welcome this year’s budget, which sharply focusses on issues that propel the growth of aspirational India. Addressing the challenges of severe water stress in the nation as one of its topmost agenda, this budget gets to the bottom of things by proposing comprehensive measures for 100 water-stressed areas. Given that the budget also aims to empower farmers by increasing their dependence on off-grid solutions with solarized grid-connected pumps through the PM-Kusum program, I think that this will act as a catalyst to sustainable irrigation solutions across the country.”

The focus on bringing down the commercial losses in the distribution companies by mandating prepaid meters, coupled with the consumers having the ‘choice of suppliers’, may resolve the long-term viability issues of the power sector.  The usage of solar in the railways and farming and usage of farmlands for solar projects could open up new entrepreneurial opportunities and help in faster adoption of solar energy across the country.

“We urge the government to consider the use of microgrids that can help improve the utilization of solar panels deployed with these pumps as well as ensuring groundwater management. Without such integrated policies, push for just deployment of solar pumps could lead to exploitation of limited groundwater resources and result in unintended consequences during summer months,” said Dr. Rahul Walawalkar, president, India Energy Storage Alliance (IESA).

Many in the industry felt that the Budget 2020-21 had a clear intent on fulfilling India’s Conference of Parties (COP) 21 commitments in a sustainable manner.

Although the budget emphasized on the expansion of solar, however, the finance minister did leave a grey area regarding custom duties on imports.

Ashish Khanna, the managing director of Tata Power Solar and president, Tata Power (Renewables), opined that the Budget 2020, is set in the right direction. He said that the promotion of smart metering is a good step, “but one step can’t be the solution to all problems.”

Further, he said that the industry awaits for the details of the budget.

However, an official of the Ministry of Finance confirmed to Mercom that the basic customs duty on the import of solar cells and modules into the country will remain nil, for now.

The government also intends to promote smart metering, and the finance minister urged all the states and union territories to replace conventional energy meters by prepaid smart meters in the next three years.

Lastly, the budget also underlined the need to promote electric vehicles. Sitharaman also stated that customs duty rates are being revised on electric vehicles to facilitate electric mobility.

“We welcome steps to boost electronics manufacturing. Power electronics and electronic manufacturing is an essential part of advanced storage and EV ecosystem. We hope that this new program can boost component manufacturing in India and reduce the reliance on imports for Indian companies,” Dr. Walawalkar.

“The 2020 budget has some aspects to it that could help the renewable energy industry, but there is also added uncertainty by proposing new solar duties without clarity. It is unclear how specific programs will be implemented. Overall, the budget does not lay a clear path to reach the goal of installing 100 GW of solar by 2020,” said Raj Prabhu, CEO of Mercom Capital Group.

Image credit: PIB