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Budget 2020: Solar Power’s Allocation Rises by 10 Percent
While the general sentiment among India's industrial stakeholders varies depending on one's perspective, there is a clear sense of satisfaction with the focus maintained on transitioning to a renewable energy-driven economy in the Union Budget 2020. India has committed to sourcing 40% of its total energy needs from non-fossil fuel sources by 2030, as part of its Intended Nationally Determined Contributions under the Paris Agreement. By 2019, India had already achieved 17% of its energy needs from non-fossil sources, with an installed capacity reaching 35%.
The budget shows a significant increase in the allocation for the Ministry of New and Renewable Energy (MNRE), rising by 10.35%. Over the past three years, this represents a compounded annual growth rate of 10%, based on the actual expenditure figures from 2017-2018. This continued emphasis positions India as a global leader in the pursuit of cleaner energy solutions and sustainable development.
What stands out is not just the numerical allocations but the comprehensive approach taken. Here are some transformative initiatives highlighted in the budget:
**Kisan Urja Suraksha Evam Utthaan Mahaabhiyaan (KUSUM)**
Launched in 2018, KUSUM aims to install 1.75 million 3 HP solar-powered irrigation pumps in areas without access to the electricity grid. Additionally, another million pumps are planned for regions with grid connectivity, promoting a shift to cleaner energy and boosting farmers' income. Farmers will receive a reliable power supply and the option to sell excess power back to the grid where feasible. This initiative aligns with the government’s goal of doubling farmers’ incomes while reducing the costs associated with rural electrification through grid expansion. The budget has now increased the target to 3.5 million pumps, with an allocation of 700 crore rupees for expanding KUSUM and another 300 crore rupees for utilizing barren land for grid-connected solar power generation. The aim is to produce 4 GW of power using this 1,000 crore investment. If executed effectively, this could provide farmers with additional revenue streams and make better use of underutilized rural land.
India currently has an estimated 30 million diesel or electric irrigation pump sets, contributing to a substantial fossil fuel import bill and environmental challenges. A shift toward decentralized power generation holds immense potential for achieving India’s 2030 targets under the Paris Agreement. An independent study by IEEFA suggests this move could enhance farmer incomes while shifting to more affordable and cleaner energy sources.
**Encouraging Utilities Like Railways to Generate Solar Power**
The budget envisions generating 18-20 GW of solar power, with railways playing a key role. Projects include installing solar panels along railway tracks and rooftop installations at rail yards. One pilot project, in collaboration with Bharat Heavy Electricals Limited (BHEL), is expected to become operational in Bina, Madhya Pradesh, by March 2020. With a capacity of 1.7 MW, it will supply 2.5 million units of electricity annually to the railways grid, powering traction.
**Corporate Tax Reduction**
To incentivize the establishment of new renewable energy facilities, the budget extends the 15% corporate tax rate, originally applicable to new manufacturing plants, to renewable energy units.
**Dividend Distribution Tax Abolition**
A major obstacle to foreign investment in renewable energy was the dividend distribution tax (DDT). The budget has eliminated this tax, paving the way for increased foreign investment.
**Smart Metering**
Proposals for smart metering aim to alleviate financial stress on power distribution companies (DISCOMs). Similar to a SIM card and mobile phone system, users would need to prepay to load their meters and select their power provider. Providers could then charge based on time-of-day tariffs. The goal is to transition all households to smart metering within three years. Each smart meter costs approximately 3,000 INR, raising questions about funding given logistical challenges.
In conclusion, the sun is indeed shining brightly on the renewable energy sector. While challenges remain, particularly in ensuring proper implementation and avoiding overuse of resources, the budget reflects a strong commitment to a greener future.