India’s new budget aims to boost renewable energy

With
India facing rising fuel prices, threats to energy security, and the need to
manage economic growth with pragmatic consideration of climate change,
renewable energy offers a critical solution to India’s burgeoning energy demand
challenges. Further, renewable energy technologies are more labor-intensive
than more mechanized fossil fuel technologies, as demonstrated in more mature
markets, and can provide a tremendous opportunity to create domestic jobs.

The
National Democratic Alliance (NDA) government of India has presented its first
full annual financial budget since it came to power in May 2014. During the
presentation, Finance Minister Arun Jaitley made several encouraging statements
regarding the renewable energy industry. The revised target for renewable
energy capacity is now 175 GW by 2022, and it includes 100,000 MW solar, 60,000
MW wind, 10,000 MW biomass, and 5,000 MW small hydropower. The tax on coal to
support clean energy technologies has been doubled from INR 100 to INR 200 per
metric tonne of coal and will generate an additional INR 1,200 billion for the
national Clean Energy Fund. Nevertheless, it remains to be seen to what extent
renewable energy will benefit from this.

India,
the world’s third largest emitter of greenhouse gases, is among the few
countries in the world to have introduced a carbon tax. Of India’s installed
power generation capacity of 255,681.46 megawatts (MW), around 60%, or
154,170.89MW, is coal-based. The cess at current levels aggregates to Rs.6,000
crore every year.

Excise
duties on certain materials used in the manufacture of wind turbines as well as
round copper wire and tin alloys used in the manufacture of solar PV ribbon and
solar water heaters have been reduced to zero. This step is viewed as a part of
the push towards products ‘Made in India’ and is aimed at boosting domestic
manufacturing and creating jobs.

The
government also proposed setting up a National Investment and Infrastructure
Fund with an initial sum of INR 200 billion, which would benefit infrastructure
companies. With India targeting 100 GW of solar power and 60 GW of wind power,
infrastructure is crucial and the funds announced will considerably reduce the
pressure on developers.

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