The Union Budget presented by Finance Minister Arun Jaitley on Saturday was a momentous occasion for renewable energy with the announcement of a visionary goal of 175-gigawatt capacity by 2022. This makes India one of the most aspirational markets for renewable energy.
The 175-GW goal includes a target of 100 GW from solar energy, keeping in mind the fact that its cost is rapidly coming down. Solar energy is much more valuable since it is predictable daytime electricity and can be distributed, reducing the burden on transmission and distribution infrastructure. We believe solar electricity will become the cheapest source of power and it is heartening to the government to build a strong vision for its growth from the current 3 GW to 100 GW.
The Finance Minister proposed to increase the clean energy cess from Rs. 100 to Rs. 200 a tonne of coal, etc., to finance clean environment initiatives, which is a significant step in the right direction and will give the government funds to support green energy initiatives. This demonstrates India’s commitment to fighting climate change and sets an example for other countries.
While the growth forecast for many major economies is being reduced, the Indian budget has several provisions to ensure that the country remains unscathed and grows faster. A slew of measures were announced to boost the infrastructure sector and expedite implementation of big-ticket projects. Allowing infrastructure sectors such as rail, road and irrigation to raise fresh capital through tax-free bonds will solve liquidity constraints for these projects and reduce cost of capital. A committee is being appointed to propose pre-approved guidelines for big projects and such projects now need not wait for tens of prior approvals to start the work. This would be a milestone change as projects can be implemented without delays and can access cheaper capital as the project risks reduce.
While the budget has been visionary and has laid out the targets clearly, the details of how the government proposes to support achieving these targets needs to be further developed. To help achieve the ambitious target of 1,00,000 MW of solar capacity by 2022, the industry has been advocating for a range of measures such as bringing solar sector within the ambit of priority sector lending with a separate sectoral cap, allowing tax-free infrastructure bonds for solar power, implementation of an interest subvention scheme to support solar-related manufacturing and power projects and reducing the hedging cost for solar ECBs. However, none of these proposals has been accepted in the current budget, and we hope the government will continue to give due consideration to these with a view to making the ambitious targets achievable.
