Renewable Energy needs India’s Budget 2018 support

Renewable Energy Needs some Budgetary Money in India Budget 2018

 

Context :-

  • India’s renewable energy capacity, as of October 2017, stands close to 61 GW. While sizeable, this is significantly short of the 175 GW renewable energy capacity target set for 2022.
  • Will the government back up its vision with effective policies to scale up renewable energy, support domestic manufacturing, and skill the workforce?

Decline of Renewable Energy Sector :-

Financial year 2017-18 has seen a reduction in renewable energy sector, due to :-

  • Lack of policy clarity
  • Fiscal changes
  • Trade policy uncertainty
  • Regulatory hurdles
  • Reduced commissioning of projects.

Challenges before Budget 2018 :-

Post GST :-

  • The most important fiscal reform of 2017 has increased some of the challenges for the clean energy sector.
  • The adoption of the goods and services tax (GST), which brought down the tax on coal to 5%, previously taxed at 11.69%.
  • Coal cess being subsumed in the GST compensation fund  for compensating states for revenue losses in the wake of shifting to the new indirect tax regime.
  • In the absence of the NCEF, the budgetary allocation to MNRE, as well as financing of mechanisms and schemes that spur further renewable energy deployment, would be a test of the upcoming budget.
Pre GST :-

- Coal taxed at Rs 400 per tonne, previously accrued into the National Clean Energy Fund (NCEF), was used to make budgetary allocations to environment and clean energy related ministries and schemes.

- Since 2011, a bulk of the budgetary allocation to the ministry of new and renewable energy (MNRE) came from the NCEF. 

- In 2017-18, of the Rs5,473 crore allocation to MNRE, Rs5,342 crore came from the NCEF. 

Duty on Imported Solar Modules :-

  • Duty being considered on imported solar modules in the form of a temporary safeguard duty or a long-term anti-dumping duty.
  • China, Taiwan and Malaysia currently manufacture 90% of the solar modules used in Indian projects.
  • India’s domestic solar manufacturing capacity is too small and inadequate to meet the growing demand from developers.
  • The imposition of duties on imported solar products will raise the cost of solar power for developers which in turn, will lower the competitiveness of solar electricity, and increase the burden on the already financially overburdened utilities.

What Govt needs to do to achieve targets by 2022 ?

A more strategic manufacturing policy is needed :-

  • New and innovative means are needed to build new markets for visionary targets.
  • In the 2018 budget announcement, the government must focus on ways to use public money most effectively.
  • Public money could be earmarked for innovative financial mechanisms that result in greater investment of private capital, especially from relatively untapped sources such as pension funds, insurance companies, and sovereign wealth funds.
  • Using this budgetary support to underwrite risks, increase the flow of private capital, and lower the cost of finance, could result in the creation of deep, vibrant and self-sustaining markets in renewable energy and its affiliated sectors.
Conclusion :- 

In order to advance national priorities like energy security, energy access, job creation and increased domestic manufacturing as well as to display international climate leadership, it will require the development of clear policy pathways and support mechanisms to nurture these new markets. India must show the renewable energy sector some budgetary money.

( Source :- LiveMint & Ideas of Kanika Chawla )

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