Arun Jaitley's Budget 2015 is lukewarm to the green energy sector

Budget 2015 failed to provide any concrete road map for the government's ambitious green energy targets. Finance Minister Arun Jaitley shared no details on the implementation and financing of solar, wind, biomass and hydro energy projects in the country.

"The Ministry of New Renewable Energy has revised its target of renewable energy capacity to 1,75,000 MW till 2022, comprising 100,000 MW Solar, 60,000 MW Wind, 10,000 MW Biomass and 5000 MW Small Hydro," said Jaitley in his speech. However, these targets had already been announced over the past few months. Budget 2015-16 has thus met with a lukewarm response from the renewable energy industry.

Representational image. AFP

Representational image. AFP

In the solar energy space the government is keen to attract private sector investment but financing, land acquisition, policy instability and grid efficiency continue to hold back installation of capacity and generation of power. The Budget did not incentivise investment or manufacturing in the solar sector other than an excise duty cut on round copper wire and tin alloys for use in the manufacture of Solar PV ribbon (used in solar PV cells), subject to certification by the Department of Electronics and Information Technology.

Anmol Jaggi, director, Gensol Consultants, says, "The excise cut on copper wire and tin alloy for solar PV cell manufacturing is again a good move but the impact on project cost is not even 0.5 percent."

India is today a 1,000 MW per year solar market; the government wants to increase this 100 times in the next seven years.

"Unlike rail and roads, tax-free bonds have not been specifically proposed for renewable energy," says Anish De, partner — infrastructure and government services, KPMG India. "Given this, any funds from tax-free bonds will now have to come out of the general pool of infrastructure bonds," he says.

The Finance Minister on Saturday proposed to increase the Clean Energy cess from Rs 100 to Rs 200 per metric tonnes of coal, etc. to finance clean environment initiatives. But "the proposals for the utilisation of funds from the increased coal cess are yet to be spelt out," says De. "It would have been better to propose specific allocations and measures for renewable energy, especially on availability of low cost funds for the renewable energy sector."

"Another big expectation from the Budget was a reduction in the MAT (Minimum Applicable Tax)," says Jaggi, "However it hasn't been changed and renewable energy companies shall continue to pay 18 percent MAT even though there are said to be exempted from income tax."

Prime Minister Narendra Modi, a keen proponent of solar energy in his home state of Gujarat, has been proactive on the renewable energy front and there is tremendous optimism from the private sector. This year’s Budget has failed to walk the talk though.

Updated Date: Feb 28, 2015 19:46 PM

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