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Budget 2022: What To Look For

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The world is fast developing towards renewable energy. India is also making every effort to boost its green energy generation. As Union Finance Minister Nirmala Sitharaman is all set to present Budget 2022, Industry is eagerly waiting to know if there will be a positive move towards greener technology.
Let us read what our experts expect from the budget 2022

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It is expected from budget 2022 that the Solar Industry will boom with a potential investment of over USD 15 billion. As the government concentrates on electric cars, green hydrogen, manufacturing solar equipment, and meeting the ambitious 175 GW renewable capacity target, the solar industry is predicted to expand in 2022. In my opinion, the Union Budget for 2022-2023 should include tax breaks and credit guarantees to encourage technology adoption in the solar power industry.

Also, installing a solar system is a considerable investment, and not everyone can afford it. Well, to relax in this issue, it is also anticipated that a credit guarantee programme will be established to reduce the risk for consumers with poor credit scores. As a result, such customers will get bank funding for rooftop solar installations.

Gautam Mohanka, MD, Gautam Solar

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Indian Renewable Industry continues to maintain high speed growth and play a leadership role at Global level in pushing renewables.

To help it sustain its journey of growth, Renewable Industry expects the 2022 Budget to further facilitate and provide imputes this growth by:

  1. Driving local manufacturing prowess in renewables and making it technologically savvy to continuously optimise cost and efficiency to achieve lowest cost of power to society in the long run.
  2. Provide adequate incentives and tax reliefs to Industry to help India become a renewable Manufacturing hub.
  3. Availability of adequate and diverse long term funding avenues for the industry at most competitive terms.
  4. Providing a stable and enabling policy landscape that can ensure sustainable investor interest and help speeder growth in less tapped C & I and Battery segments.
  5. Further strengthening transmission and storage infrastructure so that various renewable options can integrate for a more sustained and cost effective green power environment in the country.
  6. GST roll back on renewable equipment’s to 5 % from 12 %.

SK Gupta, CFO, Amp Energy India

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“In the last Budget, Government’s main objectives were to boost domestic manufacturing of Solar PV modules and cells to reduce the dependence on Chinese suppliers and provide financial muscle to central PSU’s. INR 4,500 crore was allocated in last year’s budget for manufacturing of ‘High Efficiency Solar PV Modules’, to be implemented through MNRE. The scheme received an encouraging response. Thus, there was a proposal to enhance funding under the PLI scheme to INR 24,000 crore. Once implemented, it will boost Indian manufacturing with 54 GW manufacturing capacity from the current 12 GW under setup by the eligible four winners of the first PLI bid. In order to achieve the targets set for the sector, module manufacturers should pace up production to meet demand and to avoid dependency on foreign module manufacturers. Apart from this, there are areas where quick, committed and targeted actions need to be taken to achieve the commitment of 100 GW by 2022 – evacuation and transmission infra, grid stability and grid integration, investment in smart grids, green corridor, land availability and domestic manufacturing need to be the focus areas.”

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Shilpa Urhekar, India National Head – Solar EPC, Sterling and Wilson Renewable Energy

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The last couple of years have been extremely difficult for the distributed solar rooftop sector. The Pandemic has wreaked havoc on the economy, and the solar energy sector is not indifferent to it. In addition, rising raw material costs from aluminium, copper and steel to glass, combined with a global disruption in shipping lines has resulted in an unprecedented increase in costs as well as significant uncertainty on supplies and pricing.

This has made amply clear that India needs to be self-reliant for the entire value chain of the solar sector. The government has made significant steps in that direction which is going to help the supply side significantly.

In our view, the government should take a few additional steps to also improve the demand side of the business by making it more cost-efficient and simpler.

The recent announcement by the MNRE on simplifying the process for residential customers to receive the benefits of central subsidy on rooftop solar installations is a welcome step in the right direction. We hope that in the budget the government can take it a notch further and include solar subsidies under the Direct-Benefit-Transfer program rather than routing it through state DISCOMs.

In addition, if the government can include electricity under the purview of GST, it will not only benefit the end-consumers, but it will also push the domestic manufacturing further given that there will be no input credit on the BCD, which is soon to be implemented for imports of solar panels and solar cells. In addition, if solar rooftop companies in the business of asset ownership and PPAs are able to get a refund of GST, that will be a huge step forward.

Lastly, we have seen that easy and affordable financing is one of the biggest hurdles in large scale solar rooftop adoption in the Homes and SME sector. We would like for the budget to include an interest subvention of 1-2% on solar loans, just like they have done for affordable housing. Alternatively, the interest on solar may be made tax deductible for home-owners.
We have been and continue to be extremely excited about the growth potential of the solar rooftop sector, especially for Homes and SMEs. We are sure the government will continue to take positive steps to increase solar adoption in these sectors through the budget and on an on-going basis.

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Gagan Vermani, Founder & CEO – MYSUN

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2021 proved to be a year of growth and resilience for RE capacity additions in India, especially solar. The sector recorded its highest annual new capacity addition in several years. In 2022 and beyond, mobilizing finance and creating policy imperatives that enable the rapid expansion and adoption of renewables will be key to achieving our ambitious solar targets.

At present, distributed/rooftop solar adoption is primarily concentrated in the C&I circles. However, regulatory support for the country’s rooftop sector can fuel extensive adoption across all consumer categories. Residential solar has a massive growth potential. We also feel that there is a need to shift focus from capital subsidy to generation-based incentives. The reduction of import duties for batteries can be an added incentive, considering the rising project cost due to such duties. In addition, instead of allocating all subsidies and incentives just to lithium technology, requisite incentives should be extended to flow batteries, which could play a significant role in the energy storage market.

Speaking of duties, a Basic Custom Duty (BCD) of 40% on imported modules from China are due to be levied in April. This will lead to a significant rise in project costs and may temporarily impact the demand for solar adoption. It will be interesting to see how the PLI domestic solar manufacturing program takes shape, as that will have a strong implication on the sector – in terms of cost, quality as well as technology.

Ritu Lal (Senior VP & Head – Institutional Relations), Amplus Solar

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We are hoping that the Union Budget 2022-23 will set us on a path to recovery beginning this year. To address issues such as fiscal policies, environmental pollution, and the promotion of renewable energy, strong and supportive actions are required. A return of consumer confidence in renewable energy sources, improved financial market conditions, and an increase in manufacturing and export activities in the country would be crucial.

As per recent speculations, it is also expected that the upcoming budget will provide more clarity on tenure of Basic Custom Duty (BCD) on import of Solar PV cells and module. Expansion of the production-linked incentive (PLI) scheme to boost domestic manufacturing significantly. Additionally, we expect the government to provide financial incentives for the rapid growth of producing Green Hydrogen and making India as a Global manufacturing hub for Electrolyser to generate green hydrogen.

Manoj Gupta, VP-Solar and Waste to Energy Business, Fortum India

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The year 2021 was a year of mixed fortunes. On the one hand, we witnessed India crossing 100 GW of installed renewable energy, while on the other, the pandemic took a toll on communities at large. Many of the efforts that had started at a good clip in early 2021 saw considerable slowing down mid-year due to the pandemic. The past year also had approximately 12GW of solar energy capacity installed, more than 250% compared to 2020.

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Currently, rooftop photovoltaics (RTPV), while showing great promise and potential, are lagging behind large ground-mounted PV. Distributed power generation, especially for residential consumers, is an opportunity waiting to be untapped. The capital subsidy scheme for residential consumers is expected to spur growth in this direction. The upcoming budget needs to allocate at least INR 1,000 crore for RTPV, with a target of 6 GW capacity. State distribution companies (DISCOMs) should become part of the solution. At the same time, the eligibility of a DISCOM to be a part of this should depend on past performance, present preparedness for RTPV uptake, and financial strength.

The Government has planned on increasing the production-linked incentive (PLI) scheme for solar manufacturers from INR 4,500 crore to INR 24,000 crore to allow India to cross 10GW of manufacturing capacity, thereby opening up avenues for export. While the updated Approved List of Models and Manufacturers (ALMM) has ~41 manufacturers, the number is likely to go up considering the additional funds allocated to the PLI scheme. With Basic Customs Duty (BCD) expected to be implemented from April 2022, domestic manufacturers can safeguard themselves from being dumped by international players while increasing their production capacity. Many developers consider this to be a restrictive move in terms of discovering a true market price for PV modules which is lesser than what the distorted market yields. However, given the increase in the quality of domestically-manufactured PV equipment along with the willingness of Solar Energy Corporation of India (SECI) and other consumers to pay slightly higher power purchase agreement (PPA) rates compared to 2019-20, developers should not be deterred from sourcing Indian modules.

Although the 100 GW solar target for 2021-22 is stiff, the efforts made by the Government (both states and central), developers, and nodal agencies so far have been commendable. With extant difficulties arising due to the pandemic and disruption in the global supply chain, it is essential not to lose focus on the broader target announced by the Prime Minister at COP26 of 500GW of renewable energy capacity by 2030 and work assiduously towards it.

Dr Jai Asundi, Executive Director, CSTEP

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