Before we go into weighing the Budget 2016-17 ("Budget") in terms of renewable energy and gREntrepreneurship, its will be quite relevant have a glimpse of the global economy surrounding India presently.
To put it without any hesitation, global economy is at crisis, yes at crisis. Indications of this crisis reflect through a slumpy global growth of 3.1% (2015) in contrast to 3.4% (2014), embattled financial markets, contraction in global trade volumes and overall uneasiness. Global investors are worried of the unfavorable conditions which make return of investment very dubious.
Despite all these, International Monetary Fund upheld India as bright spot. But does that mean India is beyond reach of these unfavorable conditions?? Certainly not. I would rather say India's internal situations have been far more unfavorable which included economy of low growth, high inflation and overall lack of investors' confidence. Given this India certainly needed NOT ANOTHER populist budget of freebies distribution, but a budget that goes back to the basics, a budget that addresses the areas which repeatedly appeared in political discourses, in research papers BUT NOT in action and implementation. The Budget 2016-17 exactly focuses on this aspect.
If looked at carefully, the underlying focus of this Budget is twofold i.e. infrastructure and economy, be it rural or urban. And the incentives exactly fall in line with this focus. The Budget aims at creating an environment where you choose the business that suits you and the government aims boosting a suitable infrastructure to the business.
FOREIGN DIRECT INVESTMENT POLICY FOR RENEWABLE ENERGY SECTOR
Foreign Direct Investment (FDI) up to 100% is permitted under the automatic route for renewable energy generation and distribution projects subject to provisions of The Electricity Act, 2003. Few prominent foreign investors operating this sector are Suzlon, Enercon, Vestas, RRB, NEG, Micon, Applied Materials (USA) etc.
RENEWABLE ENERGY SECTOR AND THE BUDGET
Document wise, the Budget does not dedicate any paragraph (with flowery words) on renewable energy or gREentrepreneurship, however, if read between the lines, the opportunities and thrust areas are ample. It is to be noted that the incentives/exemptions granted in previous budgets continue to hold good unless they are specifically terminated or superseded. Below is a summary of what the Budget holds for renewable energy sector and gREentrepreneurship:
Industrial Solar Water Heater - Reduction in Basic Customs Duty ("BCD"). BCD on industrial solar water heater is being increased to 10% from 7.5%. In my view, this will discourage import of such water heaters and encourage manufacturing in India.
Solar Tempered Glass - Withdrawal of BCD Exemption. BCD exemption on solar tempered glass, solar tempered (anti-reflective coated) glass is being withdrawn and 5% concessional BCD is being imposed. Idea seems to discourage imports and encourage domestic value addition.
Solar Lamp - Excise Duty Exemption. Solar lamp has been exempted from excise duty i.e. straight from 12.5% to NIL.
Carbon Pultrusions - Reduction in Excise Duty. Excise duty on carbon pultrusions used for manufacture of rotor blades, and intermediates, parts and sub-parts of rotor blades for wind operated electricity generators being reduced to 6% from 12.5%. Move aims boosting domestic manufacture.
Polyester Resin - Increase in Excise Duty. Excise duty on Unsaturated Polyester Resin (polyester based infusion resin and hand layup resin), Hardeners/Hardener for adhesive resin, Vinyl Easter Adhesive (VEA) and Epoxy Resin used for manufacture of rotor blades, and intermediates, parts and sub-parts of rotor blades for wind operated electricity generators being increased to 6% from earlier NIL.
Municipal Waste to Energy - Incentives. Valid agreement between importer /producer of power with urban local body for processing of municipal solid waste for not less than 10 (ten) years from the date of commissioning of project is as an alternative condition for availing concessional customs/excise duty benefits in case of power generation project based on municipal and urban waste.
Improved Cookstoves - Excise Duty Exemption. Excise duty on improved cookstoves including smokeless cook-stoves for burning wood, agro-waste, cowdung, briquettes, and coal has exempted unconditionally. From previous duty rate of 12.5% it has now come down to NIL.
Electric/Hybrid Vehicles - Customs/Excise Incentives. Customs and excise duty concessions on specified parts of electric vehicles / hybrid vehicles has been extended without any specified time limit. Previously, the incentives were scheduled up to March 31, 2016.
Boost to gREentrepreneurship - Company Incorporation in a Day. Government is planning to bring an amendment to the Companies Act, 2013. The proposed amendment will help would be entrepreneurs incorporate companies in ONE DAY. This is definitely a step to laud and this will make it easy for budding gREentrepreneurs to quickly launch their business.
Hydrogen/Hybrid/Electric Vehicles - Exemption from Infrastructure Cess. Electric, hybrid and hydrogen vehicles (based on fuel cell technology) which have been registered for use solely as taxi has been exempted from this cess. The idea seems to encourage non/less polluting vehicles in public transport.
Massive Electrification - Rural Electrification. Based on government records, as on 1st April, 2015, a total of 18,542 villages were not electrified. Out of these villages, as on 23rd February, 2016, 5542 villages have been electrified. The Government claims to be committed to achieve 100% village electrification by 1st May, 2018. In this regard, the government has allocated 8,500 crore fund. I can definitely see a lot of opportunity for the renewable sector in this regard (esp. solar). This is considering the practical difficulties in connecting villages through traditional grid system on one hand and convenience offered by renewable energy systems on the other hand. The government has also nowhere specified electrification through traditional grid only.
Small & Medium Enterprises - Increase In Presumptive Tax Exemption Limit. Presumptive taxation scheme under section 44AD of the Income Tax Act is available for small and medium enterprises i.e non corporate businesses with turnover or gross receipts not exceeding one crore rupees. This system frees these entrepreneurs from the burden of maintaining detailed books of account and getting audit done. The Budget has increased the turnover limit under this scheme to Rupees two crores. This is definitely going to encourage the gREntrepreneurs who desire to start on a small level.
This Budget is growth oriented and aims at long term where people will not have to fight for incentives. A strong rural infrastructure complimented by urban growth and demand will play a beautiful economic harmony. Weighing from the scale of renewable energy, in a scale of 5, Greeinvent India gives 4 out of 5.