With India’s aggressive clean energy push likely to sustain the momentum it has seen in recent years, all eyes are on the Union Budget 2024 to be presented by Finance Minister Nirmala Sitharaman on July 23.

Stakeholders in the solar and other clean energy sectors have a long wishlist from the Budget for the industry to help India achieve the ambitious target of 500 GW of renewable energy capacity by 2030 and net-zero emissions by 2070. The expectations range from tax rationalization and policy reforms to financial incentives to boost growth and foster innovation.

Kishor Nair, Chief Executive Officer of Avaada Energy, said, “The upcoming Budget is pivotal in propelling the nation’s green agenda, unlocking investments, streamlining policies, and accelerating the transition towards sustainable practices.”

Nair makes a series of recommendations on policy reforms to help India enhance its global competitiveness, drive sustainable growth, and achieve its clean energy transition goals. “Aligning state policies with national interests to facilitate the export/sale of renewable energy outside host states is a must. Removing policy constraints and step-brotherly treatment by the host state such as the imposition of additional charges/cess and restrictions on land allocation and access to state transmission network is essential.”

Neerav Nanavaty, CEO at BluPine Energy, felt robust regulations for the commercial and industrial sectors would not only attract investments but also streamline operations, fostering sustainable growth.

Tax Reforms and Financial Incentives

On the tax reforms side, the industry expects rationalization of Goods and Services Tax (GST) on solar projects, reduction or elimination of Basic Customs Duty (BCD) on imported solar modules and cells, the introduction of tax rebates for residential solar adoption, and implementation of innovative financing models like green bonds.

Sharad Pungalia, MD & CEO of Amplus Solar, said, “We urge the government to support solar projects by alleviating the existing tax burden on project costs, especially now that the Approved List of Models and Manufacturers (ALMM) has been fully implemented. There must be a rationalization of GST across all components of the solar sector, and BCD must be eliminated on solar modules.”

Dhanpal Jhaveri, Vice Chairman of Everstone Group in India and CEO of EverSource Capital suggested that the GST ratio should be recalibrated at 90:10 instead of prevailing at 70:30 between supply and services to reflect the true nature of the business. “This will reduce tariffs and accelerate renewable project installations.”

Parag Sharma, CEO of O2 Power, recommended extending the 15% corporate tax rate under section 115BAB for new manufacturing companies by another five years to March 31, 2029. This aims to attract more foreign capital under the ‘Make in India’ initiative.

He also suggested temporarily reducing BCD on solar modules and cells to 10%/5% until March 31, 2025, for projects bid out after March 31, 2022. Proposes increasing it to 40%/25% from April 1, 2025, once domestic manufacturing capacity is adequate.

Domestic Manufacturing

To strengthen India’s solar manufacturing capabilities, stakeholders have called for expanding the Production Linked Incentive (PLI) program, increasing allocation for research and development, and fiscal support for domestic production of solar components, especially for MSMEs.

Ishver Dholakiya, Founder and MD of Goldi Solar, wants the focus on attracting large-scale investments in domestic solar panel and component manufacturing facilities. “This will not only shorten supply chains and reduce dependency on imports but also create a cost-competitive advantage.”

“We also recommend allocating the unutilized PLI funds towards smaller companies that meet specified criteria to support their entry into module and component manufacturing. This strategic distribution is crucial for boosting the capabilities of MSMEs in the renewable energy sector,” he said.

Dhanpal Jhaveri hoped the Finance Minister would announce a reduction in import duty on solar cells to zero for end-users, with an obligation to use domestic cells in a certain percentage ratio in their projects for the next four quarters based on supply commitments provided by domestic cell manufacturers.

Energy Storage and Grid Infrastructure

Recognizing the critical role of energy storage in integrating renewable energy into the power mix, the industry feels that incentives for battery energy storage systems, support for pumped storage projects, and the introduction of energy storage obligations will go a long way in augmenting energy storage capacity.

Viability Gap Funding for battery energy storage systems and capital subsidies for smart grid implementations are other suggestions for the Finance Minister.

“Implementing concessional duties on battery energy storage systems is crucial to advancing our storage capabilities and ensuring a stable and reliable energy supply, ” said Sharad Pungalia.

Financing and Investment

To attract investments and improve project economics, the renewable energy sector is looking for better financing options for renewable energy projects, facilitation of credit access for MSMEs, the introduction of green bonds and low-interest loans, and inclusion of the entire energy transition sector in priority sector lending by banks and other financial institutions.

Shashank Sharma, CEO of Sunsure Energy, said, “We would like to see more incentives for businesses and corporates to decarbonize India’s industrial landscape. It is vital to prepare energy-intensive industries like cement and steel for the transition phase of the Carbon Border Adjustment Mechanism (CBAM).”

Varun Puri, Managing Director of Green Power International, feels investments are necessary to fund R&D to produce hydrogen with relatively coarse water quality, ideally close to seawater. “This will allow the most efficient use of one of the most abundant natural resources, i.e., water.”

Dhiman Roy, CEO of GreenH Electrolysis, said lowering GST on solar modules, wind turbines, and electrolyzers from the current rate of 5% could significantly help reduce project costs.  He also called for setting mandatory targets for central and state government entities to procure green hydrogen for their operations.

Skill Development

Neerav Nanavaty and Shashank Sharma wanted the government to address the need to upgrade the skills of the workforce to support the development of the renewable energy sector.

Sharma said, ” Training for new green jobs and reskilling of workers from conventional energy sectors will be essential for a smooth transition.”

As the sector awaits the Budget announcements, there is optimism that supportive policies and strategic investments will pave the way for a greener, more resilient energy future for India.