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Budget 2020: Solar Power’s Allocation Rises by 10 Percent
While India's industrial sector holds mixed opinions about the Union Budget 2020 depending on one’s perspective, there's clear satisfaction with the continued emphasis on transitioning to a renewable energy-driven economy. Under its commitments outlined in the Paris Agreement, India aims to meet 40% of its total energy needs through non-fossil fuel sources by 2030. Already, as of 2019, the country has achieved 17% renewable energy generation, with an installed capacity of 35%.
The Ministry of New and Renewable Energy (MNRE) saw its allocation increase by 10.35% in the latest budget. Over the past three years, this marks a compounded annual growth rate of around 10%, reflecting a strong commitment to sustainable development. This focus places India at the forefront of global efforts to reduce reliance on fossil fuels and foster a cleaner environment.
One of the standout initiatives introduced under the budget is the Kisan Urja Suraksha Evam Utthaan Mahaabhiyaan (KUSUM) scheme, which was first launched in 2018. The program aims to install 17.5 lakh 3 HP solar-powered irrigation pumps in areas without access to the electricity grid, and an additional 10 lakh pumps in grid-connected regions. This initiative not only supports the government’s goal of doubling farmers’ incomes but also encourages the adoption of cleaner energy sources. Farmers benefit from reliable power supply and the opportunity to sell excess electricity back to the grid where feasible. By expanding the target to 35 lakh pumps and allocating ₹700 crore for KUSUM expansion and ₹300 crore for barren land-based solar power generation, the budget plans to generate 4 GW of energy using a ₹1,000 crore investment. If implemented effectively, this could significantly boost rural economies while addressing challenges related to groundwater depletion.
India faces substantial costs due to its reliance on diesel and electric irrigation pumps, which contribute to the nation's fossil fuel import bill. Shifting toward decentralized renewable energy solutions presents a major opportunity to achieve the goals set out in the Paris Agreement by 2030. According to an analysis by the Institute for Energy Economics and Financial Analysis (IEEFA), this transition could enhance farmer incomes while reducing dependence on costly and polluting energy sources.
Another notable move in the budget is the encouragement for utilities like the railways to harness solar power. The railways are targeting the installation of 18-20 GW of solar capacity, partly by generating power along railway tracks and utilizing rooftops at railway yards. A pilot project with Bharat Heavy Electricals Limited (BHEL) is planned to go live in Bina, Madhya Pradesh, by March 2020. With a 1.7 MW capacity, this project aims to provide 2.5 million units annually to the railways' grid, supporting traction needs.
To attract further investment in renewable energy, the budget extends a corporate tax rate of 15% to new renewable energy units, making it an attractive incentive for setting up green energy projects. Additionally, the abolition of Dividend Distribution Tax (DDT) removes a significant barrier to foreign investment in the renewable sector, fostering greater participation from international players.
Smart metering is another area receiving attention, with plans to replace traditional meters with smart meters that operate similarly to mobile phone SIM cards. This system allows users to prepay for electricity usage and choose their power provider, enabling dynamic pricing based on time-of-day usage. While ambitious, the logistics of funding and implementing this plan—each smart meter costing ₹3,000—remain uncertain.
Despite these challenges, the outlook for India's solar sector remains bright. With strategic investments and policy support, the country is well-positioned to lead the way in sustainable development while reaping economic benefits for its citizens.