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Budget 2016 – Expectations for Renewable

Energy security is among the top priorities of the incumbent government. Amidst the uncertainty of output from coal production, the energy needs of India are more critical than ever before. India is on the threshold of a manufacturing boom and all the initiatives like Make in India, Smart Cities Mission and Digital India are linked to the Renewable Energy Mission. Clearly, the future seems heavily dependent on renewables, especially with low carbon emission being integrated into India’s development plans. It’s an opportune time and the Union Budget must try to address concerns that will further propel the development of this sunrise sector.

Below is the budget wish list of Mr. Rahul Munjal, MD, Hero Future Energies and Mr. Sunil Jain, CEO, Hero Future Energies:

Policy Related

  • Policy clarity on continuance of GBI incentives beyond 2017 (till 2022) should be announced
  • Strict Enforcement of Renewable Purchase Obligations (RPO) through penalties, and/or rewarding conforming states (such as priority funding through Deendayal Upadhyaya Gram Jyoti Yojana (DDUGJY), Integrated Power Development Scheme (IPDS), Power Sector Development Fund (PSDF)
  • National Clean Energy Fund should be utilized effectively for intended purpose, especially to drive innovation in the areas of Energy Storage, Renewable Hybrids, Smart metering, building of the green corridor etc
  • Supporting policies to encourage setting up of solar-wind Hybrid Power infrastructure (by creating a tax exemption framework and/or allowing banks to provide loans at subsidized interest rate). This would also solve a lot of issues related to land acquisition.
  • While including RE under Priority sector lending was a good start, the limit of Rs. 150 million needs to be increased upto minimum of Rs. 5 billion to make meaningful impact in the capital intensive industry.
  • Domestic content requirement in grid-connected solar bids should be discontinued, as it take the focus away from promoting a vibrant and internationally cost competitive solar module manufacturing industry.
    • Govt could help the solar module manufacturers bring their costs down and match their prices with international module manufacturers through special incentives/tax exemptions (this move will also ensure that benefits are passed across the entire value chain)
  • Govt should announce easy retail lending facility to individuals interested in setting up rooftop systems on their roofs through Commercial Banks comparable to getting a consumer loan
  • In order to ensure adequate availability of skilled labour in Renewable Energy market, budgetary support/financial incentives should be provided to organisations involved in skill development activity in the RE space

Tax Related

Tax reform, allowing Infrastructure companies to consolidate the earning of all subsidiaries for tax computation and exempting Capital Gain tax on transfer of capital assets from one Holdco/SPV to another within the company.

REITs/InvITs were launched with the aim to help developers get easier access to funds through public issue of units. But, concerns on tax leakages resulting from transferring project portfolio to REIT/InvIT and on distributions to unit holder have kept the interests low in this investment vehicle. Govt should move towards making the investment vehicle tax exempted to make it an attractive tool.

80IA Tax holiday on Renewable power generation to be extended for a period of 5 years. Benefit of the same should also be given for MAT computations.
Construction activities involved in the installation of wind/solar power projects, O&M work to be exempted from Service Tax.

We hope that the Budget provides a direction, so that the incremental capacities add up to the ambitious targets of 175 GW from renewables by 2022 as promised. There is a growing need to provide sustainable and affordable energy to all. The measures along with the declining cost of equipment could act as a force multiplier for the growth of the green energy sector.

Contributed by Rahul Munjal, Founder & MD, Hero Future Energies and Sunil Jain, Chief Executive Officer & ED, Hero Future Energies

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