Expectations from Union Budget 2018

The structural changes introduced by the government last year augur well for the Indian economy in the long term. The introduction of the Goods and Services Tax (GST) will have a positive effect on the overall health of Indian economy, especially when accompanied by further reforms. Focused reforms on doing business have helped India move up the rankings on ‘Ease of Doing Business’ by 30 places to 100th position. The expectations from the Union budget 2018-19 are:

  1. Reinstatement of Accelerated Depreciation
  2. To provide a level playing field for Small and Medium Enterprise (SMEs) and small investors and to continue diversity in investments in the Renewable Energy (RE) sector:
    • Allocate 10% of reservation in all tenders that would be floated for wind & solar energy – and would be assigned the tariff that has been discovered through the bidding process
    • Reinstate Accelerated Depreciation to the tune of 80% to retail investors with project size less than 25 MW. This will also benefit Central Public Sector Enterprises (CPSEs) and will also give impetus to the government’s Make in India vision
  3. GST Related
    • Wind and Solar projects carry a weighted GST rate of 12%. GST set-off should be made available for captive and open access, as the electricity generated is utilised for manufacturing some end product that would have a GST rate card.
    • Remove ambiguity and issue clarification that all parts /components of Wind Turbine , irrespective of their classification would attract GST @ 5%
    • Price Operations & Maintenance Services (OMS) at the rate of 5%
    • Price the services for Balance of Plant (BOP), at the rate of 5%
    • Once the project is commissioned and certified it should be eligible for refund of 13% of GST under Services category
  4. Export incentive to achieve manufacturing target of 10,000 MW+ per annum
    • Increase export incentive from 2% to 5% , to make Indian exports competitive in the global market
    • Mandate Power Finance Corporation (PFC) and Indian Renewable Energy Development Agency Limited (IREDA) to allow issuance of line of credits to OEMs for exports from India.
  5. PBI (Performance Based Incentive) to state DISCOMs
    • Give PBI to state DISCOMs for procuring RE
    • Formulate uniform wheeling & banking policy (say 5% wheeling & banking charges & transmission losses at actuals)
  6. Reintroduction of Generation Based Incentive (GBI)
    • In order to push ‘Make in India’ and indigenisation to the tune of 80% and above, GBI of 50 paisa/kWh should be made available to support investment for projects of less than 25 MW, wind – solar hybrid, repowering, uniform wheeling & banking policy
    • Coal cess should be made available for clean energy projects
These measures will enable Nation’s energy security, job-creation and facilitate a low carbon economy by providing sustainable and affordable energy for all. In conclusion, it is recommended that the Union Budget 2018-19 continues to focus on boosting consumption and prioritize investments, specifically in manufacturing and construction.