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Budget 2017: Seven steps govt needs to take for renewable energy sector

We see the demand for clean, sustainable and affordable power continuing especially in emerging markets. India's commitment at COP21, to reduce 30% to 35% carbon emission and increase renewables to 40% of the energy mix by 2030 will continue to give impetus to incremental demand for renewable energy.

Tulsi Tanti   New Delhi     Last Updated: January 20, 2017  | 19:47 IST
Budget 2017: Seven steps govt needs to take for renewable energy sector
Tulsi Tanti, Chairman and Managing Director, Suzlon Group

The renewable energy landscape, both in India and globally, is undergoing significant transformation. With over 28 GW wind energy, India today is the fourth largest in terms of wind installed capacity.

We see the demand for clean, sustainable and affordable power continuing especially in emerging markets. India's commitment at COP21, to reduce 30% to 35% carbon emission and increase renewables to 40% of the energy mix by 2030 will continue to give impetus to incremental demand for renewable energy.

The wind energy sector can easily achieve the target of 60 GW by 2022, and also harness the export potential of 10 GW (USD 10 billion), if the following recommendations can be considered in the upcoming Union budget.

The expectations from the Union budget 2017 are:

1. Continuation of Accelerated Depreciation & Section 80 IA for Wind Operated Electricity Generators (WOEGs)

There is a fair amount of Indian capital that has and is investing into wind energy projects, because of presence of Accelerated Depreciation. Most of these investments come from the manufacturing sector in India, which utilises renewable energy for their captive consumption, so that they hedge their energy costs

In a typical process industry i.e. textile, energy consists more than 30% of their operating costs, if such industry invests into renewable energy, the energy costs dips to less than Rs 1 per kWh after 6-7 years, making them competitive and profit making.

In order to continue the impetus for Make in India and make it successful, AD should be allowed to be continued

Further, with presence of MAT, and removal of Sec 80 IA, would make the energy costs higher than today, so Sec 80 IA needs to be retaine

2.    Incentive mechanism for State DISCOMs to procure wind energy

There is a requirement to incentivise state DISCOMs to meet the RPO compliances, today, there is no such mechanism

MNRE, recently floated a paper to extend Performance Based Incentive (PBI) to the tune of 62 paise/kWh to DISCOMs, which is a very good move, should be implemented  

3.    Generation Based Incentive (GBI) should be continued to maintain the growth momentum and to achieve the target of 60 GW by 2022

4.    "Zero" rate GST for Wind Operated Electricity Generators (WOEGs)

Renewable energy products currently are excise exempt, and currently electricity duty is kept out of GST, because of which the entire GST chain breaks while producing electricity, if not corrected would lead to increase in cost of generation anywhere between 30 - 50 paise/kWh

Since, it is important to contain or reduce the cost of generation, best would be to peg GST at 6% slab (revenue neutral) or best to be at 'zero' rate, which would reduce cost of generation , making renewable energy most acceptable to DISCOMs and end consumers  

5.    Concessional finance/interest subvention for manufacturing sector that invests  in wind energy for captive utilisation

An interest subvention of 5% should be given to such manufacturing units that invest into wind energy for captive utilisation.

This is to give impetus to 'Make in India' and make manufacturing sectors in India profitable, which are currently under tremendous pressure for margins due to high interest rate and energy costs.

Investment in wind energy hedges their energy costs on a long term basis, making them more competitive at the global level. This will lead to increased exports and manufacturing.

6.    To make India a global manufacturing hub

It is important to make raw material exempt from customs, and have higher tariff for import of finish goods, in order to make India a global manufacturing hub for Renewable energy.

Exemption of customs would create a right environment for manufacturers to set up their facilities in India and help achieve the country's ambitious target of 175 GW.

7.    Export subsidy (logistics support) for wind energy sector

India has tremendous potential for exporting Wind Turbines to overseas geographies. Till date India has exported more than 7,000 MW of wind energy projects across the world.

We need to have time-bound logistics subsidy (starting from 10% of the sale value to "zero" over a 5 year period), then it would be possible to achieve an export of 20 GW by 2022, which will not only earn forex for the country, but also further enhance the 'Make in India' vision.

The Union budget needs to focus on giving a boost to the renewable energy sector, enabling energy security for the nation, facilitating a low carbon economy and providing sustainable and affordable energy for all.

 

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