Pre-Budget Expectations 2017-'18

India is gearing up for the Union Budget 2017-18. 2016 saw India make significant progress in its objective of combating climate change, with some strong statements made at the international stage in Paris. At COP21, Prime Minister Modi declared that by 2030, 40% of India’s installed power capacity will be based on non-fossil fuel. India was also among the 20 nations that pledged to double the clean energy research investment in the next five years. All eyes are on the government to see how it plans to implement and finance the much-needed move to non- fossil fuels.

The targets before the renewable energy sector are substantial. To recapitulate, by 2022, India plans to have 175GW of renewable energy, reduce carbon emissions by 35 percent by 2030 and also ensure that renewable energy constitutes 40 percent of the energy mix. Wind energy is an important contributor to the renewable energy mix in India; in fact, the country has the fourth largest wind installed capacity in the world. With the right impetus and financial support, this sector can easily achieve the target of 60 GW by 2022, and also achieve the export potential of 20 GW (~ USD 10 billion).

1. Continuation of Accelerated Depreciation & Section 80 IA for WOEGs

India’s Renewable energy programme is currently oriented towards flow of equities from FIIs/FDI route, which is a welcome. Accelerated Depreciation & 80 IA needs to be continued till 2022 in line with the targets put up by the Government to achieve 60 GW by 2022.

2. Incentive mechanism for State DISCOMs to procure wind energy

There is no direct incentive policy for DISCOMS, which are under severe pressure to procure renewable energy sources. At this point, it is critical to incentivise State DISCOMs. Recently, MNRE had floated a paper on PBIs (Performance Based Incentive) to be extended to State DISCOMs, This would be an excellent move that could go a long way in removing the current hurdles faced by the sector. Additonally, Generation Based Incentive (GBI) should be continued to maintain the growth momentum and to achieve the target of 60 GW by 2022

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

At the moment, renewable energy products are exempted from excise. Electricity duty is not included in the proposed GST framework which can lead to increased cost of production of wind energy. It would be a good idea to peg GST at 6% slab (revenue neutral) or best to be at ‘zero’ rate. This can reduce cost of generation, making renewable energy most acceptable to DISCOMs and end consumers.

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

Most manufacturing operations in India are reeling under high interest rates and sky rocketing energy costs. Long term costs of wind energy are low, and the manufacturing sector should be incentivized to invest in wind energy projects. This will also provide a tremendous impetus to the ‘Make in India’ program and help this sector record higher profits. An interest subvention of 5% should be given to such manufacturing units that invest into wind energy for captive utilisation

5. To make India a global manufacturing hub

At this critical juncture, it is important to exempt raw materials from customs duties and implement higher tariff for import of finished goods. This will help to create the right environment for renewable energy companies to set up their facilities in India and help achieve the country’s ambitious target of 175 GW.

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

The export potential of India’s wind energy sector cannot be overstated. Till date India has exported more than 7,000 MW of wind energy to projects across the world. In order to increase this to 20 GW by 2022, we need to implement time bound logistics subsidy (starting from 10% of the sale value to “zero” over a 5 year period) . This will not only earn forex for the country, but also further the ‘Make in India’ vision

Renewable energy is no longer a “good to have” option. In the current situation of depleting fossil fuel reserves, increasing demand for energy and escalating climate change patterns, it is critical for India to invest intelligently in nurturing and growing this sector. As the Government’s principal economic policy document, the budget is a critical indicator of the government’s plans for utilising public resources to meet policy goals. The renewable energy sector is hopeful of seeing some positive and supportive announcements in the Union Budget 2017.