Budget 2018-19: A Damp Squib for India’s Renewable Energy Sector

The much-anticipated Union Budget 2018-19 was tabled in parliament on 1 February 2018 by Finance Minister Arun Jaitley. However, the new budget for the coming financial year has, in most parts, turned out to be disappointing for the renewable energy sector.

In the face of growing uncertainties in the domestic market, the industry was hopeful for a few subsidies and incentives that could compensate for the increasing costs of project development in the country. But to the industry’s dismay, no specific incentives, subsidies or grants were announced for the Ministry of New and Renewable Energy (MNRE).

However, the budget has taken a step forward towards providing some relief to module importers by abolishing the duty on tempered glass.

The budget has also allocated ₹2.17 billion (~$34 million) to the state-owned Solar Energy Corporation of India (SECI) under the internal and external budgetary resources. In his speech, Jaitley also announced that the government will undertake necessary measures to encourage state governments to put in place a mechanism that would ensure that their surplus solar power is purchased by distribution companies (DISCOMs).

Keeping in mind the nascent stage of the Electric Vehicles (EV) industry in the country, the government has planned to deploy more EVs.

Here are the highlights from the Budget 2018-19:

KEY HIGHLIGHTS

  • The government will take necessary measures and encourage state governments to put in place a mechanism that their surplus solar power is purchased by the distribution companies or licensees at reasonably remunerative rates.
  • Customs duty on solar tempered glass or solar tempered (anti-reflective coated) glass for manufacture of solar cells /panels/modules reduced to zero percent from the earlier rate of 5 percent.
  • Income tax for Micro Small and Medium Enterprise (MSME) companies with annual revenues of up to ₹5 billion (~$39.2 million) has been reduced to 25 percent, which is expected to benefit smaller renewable companies.
  • Solar Energy Corporation of India (SECI) has been allocated ₹2.17 billion (~$34 million) under IEBR.
  • Education cess on imported goods is being abolished by omitting Chapter VI of the Finance Act (No.2), 2004.
  • Secondary and higher education cess on imported goods is being abolished by omitting Chapter VI of the Finance Act, 2007.
  • Ministry of New and Renewable Energy (MNRE) has been allocated ₹99 billion (~$1.6 billion) under internal and extra budgetary resources (IEBR).
  • The tariff rate of customs duty for Lithium-ion batteries is being increased from 10% to 20%. The effective rate of import duty on Lithium-ion batteries (other than Lithium-ion batteries for cellular mobile phones) will, however, remain unchanged at 10%.

In the last few months of 2017, the government had presented India’s green energy sector with a slew of conducive policies and announcements, which had led to a buoyant and hopeful sentiment in the industry.

In the last Budget 2017-18, the finance ministry had announced a few positive targets, like increasing the solar park installation target from 20 GW to 40 GW. Specific targets like this were also needed in this year’s budget to keep the momentum going and ensure that the country moves steadily on its growth trajectory to achieve 175 GW of renewable energy capacity by the year 2022.

A much-required boost to India’s clean energy industry in the budget would have sent a positive signal to the world that India is serious about fighting climate change. Overall the budget was a missed opportunity.

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