Budget 2022. Keep Up The Good Work, Says FM To RE Sector

In her shortest budget speech till date in four years, Finance Minister Nirmala Sitharaman stuck to the big picture, leaving the fine details of the budget to be understood later. It would be safe to say that with key reform measures still in the pipeline, such as the Electricity (Amendment Bill) Bill, we might see Power and MNRE Minister R.K. Singh yet making the big announcements for the sector in the coming months.

The start was certainly very positive, with energy transition and Climate Action, and linked to that, financing, finding mention among the top 4 priorities for the country. The others were PM Gatishakti ( a massive highways and logistics push) and Inclusive Development.

For the Solar sector, the one headline move was the announcement of enhancement of the PLI scheme by another Rs 19,500 crore for the year 2022-23 for manufacture of high efficiency modules and their supply chain. This follows the success of the existing PLI scheme that is meant to set up a full supply chain of over 10 GW for solar equipment. There was also the announcement of an initiative to set up distributed solar plants in villages, but past experience does not lead to much optimism here.

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“The risks of climate change are the strongest negative externalities that affect India and other countries”, a line from Ms Sitharaman’s speech, should be seen as an encouraging sign for the possible future support the sector can expect.

With no clarification on the upcoming BCD levy from April 1, one has to assume that it will kick in on schedule, at this stage. That will please domestic manufacturers no end, but also cause a fresh round of lobbying from developers tied to low auction prices from a time when the future direction of solar equipment seemed to be be going only one way-down, and not the sharp uptick we saw in 2021.

The FM also announced a key move for the EV sector, in the form of an upcoming battery swapping policy, that will get mixed reactions from the industry. While seemingly good for faster adoption and lowering costs, many firms insist that it takes away a key differentiator in quality by way of proprietary innovations and quality for them, so we will see the fine print on this too.

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Mandating the use of 5-7% bio pellets in thermal plants will certainly support better use of this otherwise wasted commodity, besides helping control the issue of stubble burning hopefully and some extra income for farmers.

Announcement of a Rs 2 per litre levy on fuels without any blending seems to support the faster adoption of bio-fuels, but needlessly penalises the end consumer for something that is not in their control at all.

The inclusion of data centres and large, high density energy storage projects (Read-non lead acid battery powered)  in the list of harmonised projects for preferred infrastructure status means better and easier financing options for them.

A special focus on energy efficiency and saving for large commercial buildings has been announced, a welcome move as the country embarks  on a stage of high growth and the need to lower emissions.

On green financing, which has been marked as a key focus area by India at various fora for some time, the government has announced plans for issuing green bonds,  for public sector infrastructure projects that will lower overall carbon emissions. The move seems promising, considering the massive role the public sector will play in the coming decade and beyond in the focus on lowering emissions.