Solar Industry’s expectation from the budget… Will the sun shine?

The Railway budget cleared the intention of the government on treading greener tracks towards achievement of its agenda. This includes announcement of the plan to harness solar energy by utilizing roof top spaces of railway stations, other railway buildings and land, including through the PPP mode. It is estimated that the railway will be sourcing 20% (500MW) of its total requirement (4000 MW) majorly from rooftop solar applications in the next 2-3 years. What is the solar industry expecting from the budget tomorrow? We have tried to compile a list below. MNRE fund allocation: While the previous government had reduced the allocation to MNRE in its interim budget, the new government is expected to reverse the decision. There are huge backlogs in pending disbursement of subsidies and GBI which needs to be cleared and streamlined for future growth. Also the government is expected to expand upon the previous government’s announcement of four ultra-mega solar power projects (each with over 500MW capacity). Anti-dumping duty conundrum: The MNRE has shown its reservations for imposing anti-dumping duty on solar gears taking note of the lack of capacity to support expected installations. The commerce ministry on other hand is in favor of the duty to support domestic manufacturing industry. While the manufacturers have informed about having sufficient manufacturing capacity of both solar cells and panels, the market doubts competitiveness of domestic manufacturers even in case the duty is imposed. The government needs to handle the situation in a way that neither the capacity growth of solar hampers due to cost increase (on account of anti-dumping duty), nor does the huge domestic manufacturing capacity remain idle due to low cost imported gears. Special status: There are demands to classify Solar PV manufacturing industry as ‘Infrastructure industry’ and make it a priority lending sector while treating it differently as compared to the conventional power sector. One of the major challenges the sector is facing is with respect to project financing. The government needs to bring in effective incentive tools to support RE capacity addition. A recent report by CPI & ISB had compared interest subsidies v/s GBI or VGF and concluded that interest subsidies would actually reduce support requirement from government. Purchase obligation: The REC market has crashed with volume clearance falling below 5% even at floor price. The market is expecting stronger and immediate measures to enforce the renewable purchase obligation on the Discoms and large captive & open access consumers. There is a need for – Timely reviews, a “no-waiver” approach & stronger penalties from the SERCs to save the REC market and boost the renewable energy sector which has been missing its installation capacity targets year-on-year basis. Encouraging rooftop: In order to achieve the PM’s goal to bring solar energy to each household, there is a demand for personal Income Tax benefits for installing solar applications on house rooftops. The current level of subsidy (30%) has not made the shifting to solar applications for household attractive enough. Further a net-metering framework on national scale is expected to be simplified and operationalised for rooftop solar to inject surplus power to grid. The model recently announce by Haryana to make solar energy mandatory on some categories of buildings and areas with a suitable enforcement mechanism also needs to be duplicated across the board. Tax waivers: There is a demand from project developers and EPC players to waive-off taxes, including CST, VAT and service tax, on solar power and heating application projects for a period of at least 5 years when grid parity is expected to be achieved. Accelerated Depreciation (AD) reinstatement: The government is expected to announce reinstatement of AD benefit to wind power developer, the withdrawal of which in April 2012 has been attributed as one of the main reasons for drop in wind power project installation. AD benefit to wind projects will also put pressure on new capacity addition of solar power projects from the same target group of developers seeking tax benefit. Transmission capacity scale up: Last year saw huge quantum of wind power getting lost in Tamil Nadu due to grid constraints. A focus strategy on building dedicated green transmission corridors is required for deployment of renewable power on a larger scale. The southern grid is still yet to be fully integrated with the rest of India causing huge constraints on power flow across the two sides. Stronger transmission shall help grow inter-state sale of renewable power. Clearer and consistent policies: Power being concurrent issue there are lot of inconsistencies between the central and state policy framework. There is a need for clearer and consistent policy from start to end including grid connectivity, subsidy, open access implementation, RPO/ REC regulations, etc.