Union Budget 2019: A Mixed Bag for the Solar Industry

Union Budget 2019: A Mixed Bag for the Solar Industry

As expected from Modi Government 2.0, India’s first full-time woman Finance Minister Nirmala Sitharaman had few eggs in her basket for the renewables sector. Here’s how the key stakeholders of the solar industry, including policymakers, think tanks, leading private players have reacted to the government’s Budget for FY19-20:

reaction on budget 2019

After the budget, Power Minister R. K. Singh explained how his ministry is planning to resolve various issues pertaining to the power sector including open access, the revival of Discoms, consumer protection, tariff policy amendments, a subsidy scheme for manufacturers, etc. in an interview with CNBCTV 18.

He said: “We are coming out with a tariff policy, it will come out in the next few days, which will be transformational. Now some of the transformational steps we have already taken. From the 1st of August, before power can be dispatched, the LC has to be given… this is a major reform for the power sector. We are coming out with another scheme which will combine the features of UDAY along with the investment which we are going to make, to facilitate the achievements of those milestones towards reducing losses over a timeframe. In the tariff policy push, the consumer will be in the forefront and it will bring out for the first time the rights of the consumers; that you don’t have a right to do load shedding as and when you want, if you do load shedding you have to pay a penalty. There should be a relationship between the cost of the power purchase of the Discom and what the Discom charges from the consumer as the consumer has a right to pay which is warranted. Open access permission has to be given in specific timeframe so this will bring more competition. The tariff policy that we are coming out with will be transformational for both the consumer as well as for the generator. So, I think we are changing the power sector. Also, we have set a timeline for switching over to smart prepaid meters. Prepaid so that the collection comes in automatically and Smart because we want the time of day. So once that happens it will become feasible. We have a scheme for solar manufacturing which is in the works…whereby we will give assistance or subsidies to manufacturers… and that will come out soon.”

The Government of India’s policy think tank NITI Aayog CEO, Amitabh Kant, has welcomed the budget by tweeting, “#Budget2019 proposals to give additional income tax deduction of Rs 1.5 lakh on interest paid on loans taken for #EVs is timely!”

He further added that “pathbreaking proposal in #Budget2019 to setup Mega Manufacturing plants for sunrise & advance tech areas including Li-Ion batteries, semiconductor fab, PV, laptop computers, etc. Investment-linked tax exemptions will boost @makeinindia &  #FutureofMobility”

Industry body Federation of Indian Chambers of Commerce and Industry (FICCI) has tweeted its President Sandeep Somany’s reaction: “The #UnionBudget2019 is good & takes forward the plan that was laid out by the government during the Interim budget.”

While highlighting e-mobility move of the government, Manish Sharma, President & CEO, Panasonic India, reacted via FICCI twitter handle, “The big story of the #UnionBudget is govt announcing a clear strategy for implementation of electronic mobility ecosystem.”

On the investments front, Ramesh Nair, CEO, Adani Solar – Mundra Solar PV Ltd – a solar PV manufacturing arm of Adani Group, said by tweeting, “encouraging investment in sunrise sectors is definitely a welcome move. India needs investment in manufacturing and restructuring GDP growth more on manufacturing.”

While, on the government’s plan for improving the financial health of Discom’s, India’s largest renewable energy Independent Power Producer, ReNew Power’s, Chairman and Managing Director Sumant Sinha via his twitter handle said, “changes in National Tariff Policy, review of Uday and reforms of discoms are welcome intentions announced in the Budget speech.”

Jaideep N. Malaviya, Secretary-General, Solar Thermal Federation of India (STFI) expressed hopes that for:

Solar Thermal
“Hon’ble Fin.Min. has laid emphasis on clean cooking for all rural households by 2024. Solar thermal cooking can best meet the requirements and it is worthwhile to note that India is the global leader in solar cooking. To boost rural agriculture dairy cooperatives will be set-up and solar thermal heating will get a fillip to meet the heating needs in dairy processing.

Solar Power
Solar photovoltaic based battery charging is set to become a big business with a slew of incentives under electric vehicles. Increasing the scope of Section 35AD to include investments in semiconductors, solar PVs, lithium batteries, etc. will provide the necessary impetus to the renewable energy sector.

The One Nation One Grid with relief in undesirable on open access sales duties will also facilitate intra evacuation of solar PV power from feasible sites to high demand regions.

On the Electric Vehicles front, Shailesh Chandra, President – Electric Mobility Business and Corporate Strategy, Tata Motors Ltd said: “The incentives announced by the Finance Minister, in terms of additional interventions and steps to support the EV adoption, reinforces a strong commitment by the government to steer electrification on a faster trajectory. The proposal to lower the GST rate for EVs to 5% and reduction in duties of EV components, which we are studying, is a welcome step. It will help in further narrowing down the cost of ownership gap against ICE vehicles. Additionally, private buyers, who were earlier not considered for a subsidy through FAME 2, will now have a reason to seriously consider an EV with the tax exemption of up to Rs. 1.5 lacs.

Tata Motors has been proactively participating in EV ecosystem creation, aligned to the government’s vision of achieving a high EV penetration by 2030. Today’s announcement further emboldens our resolve and we will further accelerate our efforts.”

However, solar PV modules manufacturer Waaree Energies’ Director, Sunil Rathi, has raised his concern on the Budget and said, “While we appreciate the Government’s focus on environmental reforms, it is imperative to focus on the solar segment as a key contributor for clean energy, which is missing from the Budget. With the economic viability of the solar power coupled with the fact that conventional energy sources now have to match solar parity, it would have been heartening to see more focus on the solar segment to promote ecological stability. The infusion of Rs 70,000 crore in the PSBs to stabilize the economy will in-turn benefit the NBFCs, which, in the absence of a recognized banking unit to support small – mid-scale solar financing will provide an impetus to the solar project financing. However, the invitation to foreign PV manufactures to set-shop in India, without prior stabilisation of the domestic manufacturing market, is premature and may prove to be counterproductive for the demand in the sector, which will render the NBFC financial support redundant.

The Govt. has been indicating some changes in the solar segment for a while; however, we believe that there are critical gaps that need to be plugged. On one hand, while the safeguard duty provided the industry with interim relief, the short-sighted implementation of a year holds the proverbial sword of uncertainty in the industry. Moreover, a lack of tangible movement on the anti-dumping policy has dampened the business projections in the segment. The only silver lining in the budget is the progressive movement towards the adoption of Electric Vehicles (EVs) and the incentives being offered to the end consumer. With the promotion of clean energy through the use of EVs is likely to boost the demand in the segment, thus providing impetus to achieve economies of scale and in-turn create a viable ecosystem.”

While publicly-traded company Visaka Industries’ Joint Managing Director Vamsi Gaddam said: “Budget declaration of 2019 brings in welcoming norms for manufacturing, renewable energy, and infrastructure development sector. The progressive announcements done today will increase business development opportunities for the manufacturing industry. It will be a sight to witness how mid-size Indian companies grab the opportunities provided by our government. I believe, there are three key benefits for us this year.

  • Firstly, the proposal of investing INR 100 lakh crore for infrastructure development over 5 years will open doors to pitch-in products which are smarter and enhances the infrastructure levels of the country.
  • Secondly, the implementation of ‘One Nation, One Power’ grid in the power sector, to ensure power connectivity to states at affordable rates and power connectivity to all willing families by 2022 will boost the new building construction processes like installing an integrated solar roofing system that generates energy, instead of a traditional roof.
  • Lastly, the creation of ‘Manufacturing, Repair and Operate’ (MRO) industry showcases the commitment provided to Indian manufacturers. It will bring in a transparent environment for the ones in this business.”

On Electric Vehicles, Maxson Lewis, Managing Director, Magenta Power said, “The budget is a positive push for the adoption of Electric Vehicles in India and is in line with the series of steps taken and announcements in that direction. Namely on 4 counts – 3 direct and one indirect aspect are important from that perspective. While the total cost of ownership was always in favour of EV, the announcement in the reduction of GST rate on electric vehicles from 12%  to 5% reduces the upfront higher cost as against an ICE engine and improves the buying decision in favour of EVs. The additional income tax deduction of Rs 1.5 lakh on interest on loans taken to purchase electric vehicles is a bonus and the industry had not anticipated that. Credits to the government for this innovative idea to push for EV. A day ahead of the budget 2019, the government lowered customs duty on import of parts and components. This will drive domestic assembling of electric vehicles, which today is plagued by Chinese imports and is actually hurting the EV industry. The EV industry primarily belongs to startups and will not be the domain of large monoliths. The push to simplify and support the Start-Up ecosystem will in effect push the EV growth a lot faster.”

On attracting FDI’s and job creation, Guru Inder Mohan Singh, Director and Chief Operating Officer, Amplus Solar said, “The focus on attracting investment in advanced technology area is a welcome move. Technology is typically born in Universities in Europe and the USA, and then commercialized in China before it reaches India. By promoting advanced technology manufacturing here, India can short circuit this process and attract FDI, especially in the background of the US-China trade war. This promotion will also generate employment and slow down India’s brain drain. The vision of India being a global hub for manufacturing of electric vehicles is a pleasant move too. In the past, India has lost to China in the solar manufacturing space. A concerted effort on battery manufacturing will ensure that India does not lag far behind China, despite them having already secured the pole position.”

However, on the policy direction for Indian solar PV module manufacturing, Vikram Solar’s Chief Financial Officer, Rajendra Kumar Parakh, expressed his concern by saying that, “I would like to congratulate Hon’ble FM, Smt Nirmala Seetharaman for presenting her maiden budget. The industry was expecting a policy direction from the government to promote the manufacturing through Make In India program, especially in the renewable energy sector. Government announcement to launch a scheme aimed at encouraging global companies (through competitive bidding process) to set up mega-manufacturing plants in sunrise and advanced technology sectors appears to be a step forward in that direction.

We welcome this move as it will boost the Make in India programme. Having said that, setting up mega manufacturing plants of solar photovoltaic cells and modules require a larger support structure in the form of soft loans, export credits in order to compete globally, etc.

The research think tank The Energy and Resources Institute (TERI) has welcomed the green initiatives of the Union Budget 2019. Referring to the announcements made towards renewable energy, air pollution, water, and solid waste management, Ajay Shankar, Distinguished Fellow, TERI said: “The Union Budget presented demonstrates the government’s vision of putting India on the path to sustainable development and takes forward the government’s commitment to a cleaner environment as was highlighted in the interim budget.”

Gautam Seshadri, Head of Strategy, Blowhorn said, “The conscious effort towards strengthening the electric vehicles ecosystem by the Modi Government 2.0 in its first budget presentation is a welcome move. Promoting and helping build the infrastructure is the need of the hour for India to realise its vision of ‘30% EV mobility by 2030’. Further incentivising EVs and batteries will prove to be beneficial for both commercial and private EV owners. A reduction of GST on EVs from 12% to 5% is again a positive move. This is undoubtedly a pro-EV budget and will not only drive the adoption and manufacturing prowess of EVs but also contribute to the realisation of the Government’s Smart Cities project. The mobility sector is expected to gain considerable momentum if the proposed schemes are actioned.”

While, Sanjay Aggarwal, Managing Director, Fortum India, a clean energy company whose focus in India is on EV charging infrastructure, Solar, NOx reduction solutions for thermal power plants and Bio-ethanol, commented, “The Union Budget presented by the Hon’ble Minister Nirmala Sitharaman today clearly demonstrates the government’s vision of putting India on a growth trajectory. Fortum India appreciates the various steps taken by the government in addressing the issues related to tax and duties in the renewable sector and electric mobility.

As Fortum India proceeds in setting up fast-charging EV infrastructure in India, the reduction in GST and import duties will accelerate the deployment and usage of electric vehicles in India. We now see a lot of action in the electric mobility, charging and storage space in line with the government’s green vision, which is very encouraging for the industry.

We at Fortum wish to collaboratively work with vigour towards the government’s aim of having 30% electric vehicles by 2030, by continuing our investments in recycling the capital.”

Dr. Rahul Walawalkar, President, India Energy Storage Alliance (IESA) said, “On Electric Vehicles: the GST reduction from 12% to 5% is a welcome move. The income tax deduction up to Rs 2.5 lakh (~$3500) on the interest of the loan to purchase EV will speed up the EV revolution. Govt has set an objective to make India a global hub for manufacturing of EVs including solar electric charging infrastructure.

Exemption from customs duties for EV components such as e-drive, onboard chargers, etc. will help reduce the cost of EVs on road, at the same time, the Phased Manufacturing Plan announced by DHI will also incentivise manufacturers to invest in domestic localisation of EVs over next 3 years.

Allocation of Rs 10,000 Cr for FAME II incentives to reduce the upfront cost of EVs will have an immediate impact on boosting the sales of 2W, 3W, Cars and Buses with advanced batteries in India.”

On mega-investment in Sunrise and Advanced Technology areas, Dr. Walawalkar said: “It’s a welcome step by GoI to facilitate the setting up of mega manufacturing plants of Li-ion batteries and solar chargers. This is a very important step to ensure energy security for India to avoid over-reliance on imports of key components of EVs. We expect that setting up these Giga factories will also help us in expanding the market for stationary energy storage projects for supporting renewable integration and reducing the usage of diesel for backup power generation. At the same time, IESA urges the government to expand the incentives to other advanced energy storage technologies including thermal storage, flow batteries, metal-air batteries, fuel cells, supercapacitors and mechanical storage technologies such as gravity storage.

We are happy that the government has identified key raw material supply issues and have reduced custom duties on Cobalt mattes, a key ingredient for advanced Li-ion batteries from 5% to 2.5%.

The new announcement on section 35 AD of income tax act can help in developing of cutting edge energy storage technologies in India. This should create opportunities for exporting Made in India advanced energy storage technologies.”

On start-ups, Dr. Walawalkar said, “The government’s announcement on the continued push for start-ups can give a huge impetus on the startup ecosystem and MSME’s to diversify into EV & storage ecosystems. This is a welcome step and sufficient budget allocation should be provided to them. The focus should also be in removing bureaucratic hurdles that can help entrepreneurs to focus on bringing innovative solutions to market.

A Scheme for Promotion of Innovation, Rural Industry and Entrepreneurship (ASPIRE)

Support for technology incubators under ASPIRE scheme will create opportunities for domestic innovators as well as help attract the return of Indian entrepreneurs from around the globe. IESA is working with DST for creating a focused innovation system for industry and academic collaborations around EV and energy storage. Also setting up of National Research Foundation & various incubators can help in commercialisation of indigenous technologies.

Swachh Bharat Mission/ Recycling Li-ion batteries

We urge the government for expanding the focus of Swachh Bharat Mission to include e-waste management and also focus on recycling of Li-ion batteries. This will further help in securing the raw material supply chain for the manufacturing of li-ion batteries in India.

UJALA Yojana

Govt’ s intention to promote the use of solar stove & battery chargers will create a huge demand for advanced batteries and support the push for getting Giga Factories in India. At the same time, this initiative will help to promote sustainable energy for all. IESA is working with various government agencies to ensure that these proposed products can be designed to ensure that such solar stove and batteries can also help improving power quality and reliability in rural areas.”

Meanwhile, Suntuity Renewable energy India’s Director Imaan Javan said: “We believe in championing green energy. This year’s budget looks promising in promoting green energy in India. Today, the Finance minister Nirmala Sitharaman, welcomed global companies to set up manufacturing plants in the solar sector in India which will promote solar energy. This initiative taken by the government will enhance the solar energy segment and will promote the growth and development of clean energy in our country as well as provide employment opportunities within the country.”

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Manu Tayal

Manu is an Associate Editor at Saur Energy International where she writes and edits clean & green energy news, featured articles and interview industry veterans with a special focus on solar, wind and financial segments.