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					</table>The solar sector has a long wish list for the Union Budget 2023, which will be presented in a few days. Stakeholders look forward to Finance Minister Nirmala Sitharaman announcing tax and duty waivers for solar equipment, extending the Production Linked Incentive (PLI) program to the MSME sector, solar manufacturing to be considered under priority sector lending, and lifting duties on the import of machinery.
After one of the best years for the solar sector in terms of installations, stakeholders exude optimism about 2023, despite higher prices and supply challenges.
India installed a record 10 GW of new solar capacity during the first nine months of 2022, an increase of 35% year-over-year, according to Mercom India Research&#8217;s <a href="https://mercomindia.com/product/q3-2022-india-solar-market-update" target="_blank" rel="noopener">Q3 2022 India Solar Market Update</a> report.
India&#8217;s cumulative installed solar capacity now stands at 60 GW.
A target of 500 GW of renewables has been set for 2030, out of which solar accounts for 280 GW.
Mercom spoke to a cross-section of industry stakeholders to understand what they expect from the Budget.
Sumant Sinha, Chairman and CEO of <a href="https://renewpower.in/" target="_blank" rel="noopener">ReNew Power</a>, said that given the rising global demand for solar panels, the industry expects domestic manufacturing to be given a push that is strong enough to establish India as a global exporter.
&#8220;We expect initiatives to reduce the cost of financing and a reduction in taxes and duties for battery energy storage systems, to support the growth of the solar power industry in India.&#8221;
PLI program: Fast-tracking the manufacturing segment 
In Budget 2022, the finance minister <a href="https://mercomindia.com/budget-2022-module-manufacturing-%e2%82%b9195-billion-pli-program/" target="_blank" rel="noopener">said</a> the response to the PLI program had been good. To facilitate domestic manufacturing, the government had announced it would allocate an additional ₹195 billion (~$2.61 billion) for the program.
Gautam Mohanka, Managing Director of <a href="https://www.gautamsolar.com/" target="_blank" rel="noopener">Gautam Solar</a>, a solar module manufacturer, said, “The industry expects the government to extend the PLI program to the MSME sector. In the Union Budget this year, we also look forward to a significant reduction in the interest rates for the industry.&#8221;
Favorable tax structure
As the industry tries to cope with the increased goods and services tax (GST) costs, they hope for a favorable tax structure to help make the sector more competitive and self-sufficient.
“In Budget 2023, we look forward to receiving strong support in duty waivers and indirect tax benefits on components like wafers, cells, steel, and other commodities to ease supply-side constraints. This support will encourage investors and developers to invest significantly to meet the  500 GW renewables target at rates cheaper than fossil fuels,&#8221; said Srinivasan Viswanathan, Chief Executive Officer of <a href="https://www.vibrantenergyholdings.com/" target="_blank" rel="noopener">Vibrant Energy</a>, an open access developer.
&#8220;The solar value chain, especially the backward integration (starting from polysilicon to module), is a highly capital-intensive play with a long gestation period. It would help the industry if this could be considered for priority sector lending by the banking sector to further our &#8216;Aatmanirbhar Bharat&#8217; mission,&#8221; commented Rahul Bhutiani, Head of Sales and Marketing at <a href="https://www.adanisolar.com/" target="_blank" rel="noopener">Adani Solar</a>, the solar manufacturing arm of Adani Group.
Bhutiani pointed out that solar modules attract a GST of 12%, while on raw materials and balance of materials (BoM) items, the GST is 18%. This inverted duty structure requires a very efficient and structured refund mechanism to be in place for fair play.
Manjesh Nayak, Co-founder, and CFO of <a href="https://www.oorjan.com/home" target="_blank" rel="noopener">Oorjan Cleantech</a>, a rooftop installer, said that a tax incentive in the form of a rebate to domestic users would boost residential rooftop solar adoption. Rolling out incentives to DISCOMs for achieving rooftop solar targets would also be a positive.
&#8220;Rationalizing GST on solar projects is a must. The current GST incidence at 13.8% is very high and negatively impacts return on investments. This could be reduced to make solar investments more attractive. Lastly, easy working capital finance for EPCs is necessary since they are crucial to building quality solar assets in the country,&#8221; he added.
The industry is under pressure due to the high cost of project financing, resulting in a strain on project economies.
&#8220;Project import routes for all projects in the renewable industry should be allowed with a 5% duty. The government should look at removing the Basic Customs Duty (BCD) restrictions on imports of modules for the next 12-18 months to help improve the availability of high-quality modules at competitive prices. The government should also support the renewable industry by lowering interest rates for project financing up to 3-5% in line with international levels,&#8221; Surendra Kumar Gupta, CFO at <a href="https://ampenergyindia.com/" target="_blank" rel="noopener">Amp Energy</a>, a solar developer, said.
Sharad Pungalia, Chief Commercial Officer at <a href="https://amplussolar.com/" target="_blank" rel="noopener">Amplus Solar</a>, a distributed energy company, said, &#8220;We expect higher capital allocation toward upgrading the transmission and storage network to maintain grid stability and balance.&#8221;
Pungalia added that the government should reduce GST and BCD on components used in renewable energy generation.
He also called for focused measures like a loan guarantee plan to minimize credit risk and make residential rooftops more attractive.
More expected for the domestic manufacturing segment  
The previous budget aimed to incentivize domestic manufacturing, and this year&#8217;s budget will likely continue to do so. One of the main challenges to be addressed is the reliance on imports for solar modules in India.
&#8220;It is crucial to address the demand and supply gap in the solar hardware industry, mainly due to the low manufacturing capacity at home. As a viable solution to this, it would be necessary for this budget to reduce the current import duties. This can be gradually increased over the coming years while decreasing the production-linked incentives as domestic manufacturing scales up,&#8221; Nayak said.
Stakeholders believe that the renewable sector in the country needs all the support from the government in Budget 2023 to ensure the availability of modules and project financing at competitive rates.
Harsh Jain, Director at <a href="https://www.citizensolar.com/" target="_blank" rel="noopener">Citizen Solar</a>, a solar module manufacturer, and EPC service provider, wants the government to bring back duty concessions for the import of machinery. “This would act as a motivation for the industry to go in for capacity enhancement.”
He pointed out a difference in BCD rates for solar cells and modules and how reducing them would help. “The BCD on solar cells should be waived, and for modules, it should be only 10-15%. The government should also look into duty waivers for the import of raw materials for module manufacturing. Earlier the provision was there, but it was removed in the last budget.&#8221;
Bharat Bhut, Co-founder and Director of <a href="https://goldisolar.com/" target="_blank" rel="noopener">Goldi Solar</a>, called for the stability of policies to facilitate technology innovation and scaling up production capacity to meet the vision of &#8216;Make In India.&#8217;
“Additionally, incentives to promote solar exports will help India increase its share in the booming global solar markets,&#8221; he said.
The solar industry hopes 2023 to be even better than the previous year. It expects the Budget to help the sector overcome the current challenges and carry forward the momentum.

Solar Sector Pins Hopes on Budget 2023, Here’s the Long Wish List

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					</table>The market for electric vehicles (EVs) expanded further in Norway in 2022 with <a href="https://ofv.no/" target="_blank" rel="noopener">Norway’s Road Traffic Information Council</a> data showing that 79.3% of all new passenger vehicles sold were electric, up from 64.5% in 2021.
The number of electric cars sold stood at 138,265 out of the total sales of 174,329 last year.
The clamor for EVs was attributed to an expectation of a new weight tax and value-added tax (VAT) on EVs for the part of the price that exceeds NOK 500,000 (~$50,713), to be imposed in the new year.
Council’s Director Øyvind Solberg Thorsen said, “Almost 40,000 first-time registered new passenger cars in December alone, means that just over 22% of the entire year&#8217;s new car registrations were made during the last month of the year. Altogether, there were only 1,947 new cars that separate 2022 from the record year 2021.”
Increased demand for EVs also resulted in a 16.2% and 23.3% drop in sales of petrol and diesel cars, respectively. The proportion of new petrol and diesel passenger cars registered for the first time in 2022 totaled 6.7%. The registrations for the new plug-in petrol hybrids in 2022 stood at 14,336 which is 60.8% fewer than in 2021.
EV makers like Tesla, Volkswagen, Volvo, BMW, and Skoda among others emerged as the most preferred brands among Norwegian buyers.
Thorsen said, “Although a record number of people got a new car in December, it is clear that many who ordered a car a long time ago will not receive the car until 2023 &#8211; and then with new taxes on top. The government was not willing to give everyone, who had already ordered a new car before the proposal for the state budget for 2023 became known, an exemption from the new taxes.”
Norway was one of the 16 countries that earlier this year <a href="https://mercomindia.com/16-countries-pledge-94-billion-renewable-demonstration-projects/" target="_blank" rel="noopener">committed</a> $94 billion for clean energy demonstration projects worldwide, at the first-ever Global Clean Energy Action Forum in Pittsburgh.
Last May, the International Energy Agency said that lithium rates <a href="https://mercomindia.com/ev-battery-supply-chains-stressed/" target="_blank" rel="noopener">peaked</a> over seven times from May 2021 tightening the global EV battery supply chain. The demand for automotive lithium-ion batteries reached 340 GWh in 2021, more than twice the demand in 2020, primarily driven by the increase in electric passenger cars, which observed a 120% surge in registrations last year.

Norway EV Sales in 2022 Surged on Expectations of Higher Taxes in New Year

The <a href="https://www.telangana.gov.in/" target="_blank" rel="noopener noreferrer">Government of Telangana</a>, in a budget release order, has authorized the release of ₹58.3 million (~$789,059) to two solar project developers as refunds under State Goods and Services Taxes (SGST) and Value Added Taxes (VAT).
The state has approved an amount of ₹26.072 million (~$352,847) payable to Pratamesh Solarfarms Limited, a subsidiary of ReNew Power. It also allowed the transfer of ₹32.23 million (~$436,212) to SE Solar Limited, a subsidiary of Suzlon Energy. Both companies are based at Wanaparthy in the district of Mahabubnagar, Telangana.
The companies had previously claimed SGST and VAT refunds as outlined in the Solar Power Policy, 2015, for setting up solar power projects in the state. The funds are to be transferred to the respective bank accounts of the companies.
In a previous budget release order issued on October 21, 2020, the state government had ordered for ₹58.3 million (~$789,059) to be issued to the companies to reimburse them for their VAT expenses by way of reappropriation in the relaxation of treasury control orders and quarterly regulation orders under the state’s Solar Energy Program.
Subsequently, the state government directed the assistant secretary to the government, Energy Department, Hyderabad, to draw and disburse the amount and credit it to the respective bank accounts of the companies.
In April, the Central Electricity Regulatory Commission <a href="https://mercomindia.com/additional-costs-borne-solar-developers-gst-imposition-reimbursed/" target="_blank" rel="noopener noreferrer">declared</a> that the introduction of Goods and Services Tax fell within the scope of the “Change in Law” clause for power purchase agreements. It stated that any additional costs borne by solar developers due to the imposition of GST were to be reimbursed.
Earlier, solar power developers <a href="https://mercomindia.com/solar-developers-pay-gst-safeguard-letter/" target="_blank" rel="noopener noreferrer">aired</a> their grievances about having to pay GST on Safeguard Duty (SGD) reimbursements. They said that it was unfair that solar power companies have to pay GST &#8211; a tax on the value of goods and services in India &#8211; on safeguard duty, a specific measure under trade remedies. In March, the Ministry of New and Renewable Energy <a href="https://mercomindia.com/gst-safeguard-duty-solar-mnre-seci-ntpc/" target="_blank" rel="noopener noreferrer">released</a> a circular stating that Goods and GST, and SGD compensation to solar project developers should be paid within 60 days.

Telangana Approves ₹58.3 Million in GST & VAT Refunds to Two Solar Project Developers

The Ministry of New and Renewable Energy (<a href="http://mnre.gov.in/" target="_blank" rel="noopener">MNRE</a>) recently issued a <a href="https://mnre.gov.in/sites/default/files/webform/notices/Clarification-Guidelines-for-TBCB-process-for-procurement-of-power-from-GCSPV-projects.pdf" target="_blank" rel="noopener">clarification</a> on the August 2017 guidelines for the tariff-based competitive bidding process for  grid-connected solar photovoltaic (PV) projects.
However, the clarifications &#8211; which were introduced by the MNRE to support the domestic solar industry &#8211; have still not managed to alleviate any stakeholder concerns due to confusion around the processes that project developers must follow in order to avoid duties on solar imports.
According to an MNRE official, the ministry has now clarified Clause 20 of the guidelines, which deals with changes in law of tax rates, and has a direct effect on the economics of any solar project.
To remove the ongoing uncertainty, the government clarified that the term “change in the rates of any taxes” as mentioned in Clause 5.7.2 of the guidelines includes “change in rates of taxes, duties and cess.”
The addition of duties and cess in the clause implies that when a duty or cess is changed, the solar power generator or procurer will be entitled to compensation by the other party, as <a href="https://mercomindia.com/mnre-change-in-law-compensation-solar/">reported</a> previously by Mercom.
The Clarification
“This is a mere elaboration of the clause and not an amendment,” the official specified. “The changes in the guidelines will apply and hence will not have any drastic effect on the tenders that have been already issued.”
Had it been an amendment, it would have had to be approved in parliament. The official further said that since this is a clarification, it will be retrospective and will not need the cabinet approval.
The change in law, however, does not include any change in taxes on corporate income or any change on withholding taxes on income or dividends.
The change in the guidelines comes on the heels of Madras High Court’s <a href="https://mercomindia.com/madras-high-court-dismisses-petition-levy-safeguard/">dismissal</a> of the petition filed by project developer, Shapoorji Pallonji, against the levy of a 70 percent safeguard duty on solar imports. This dismissal has paved the way for the probable imposition of a safeguard duty on solar modules and cells imported from China, Malaysia, and Taiwan, after the Office of Directorate General of Safeguards concludes its investigation (which was stalled  in the courts).
As the eventual fate of safeguard duty draws closer, the domestic solar industry is still reeling under ambiguity, and seeks a better understanding of the compensation mechanism put in place by the government.

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