Thursday, 16 February 2017

BUDGET 2017-2018: INDIA PUSHES MORE INTO GREEN CORRIDOR

Union Budget 2017

Image Source: Hindustan Times

INDIA'S TARGET 2030

With India ratifying the Paris Pact on October 2, 2015, 3 (three) objectives have become amply clear. These are (i) lowering the emissions intensity of GDP between 33 to 35 per cent from 2005 levels;(ii) augmenting contribution of non-fossil fuel based generation to 40% of installed capacity; and (iii) additional carbon sink of 2.5–3 Gt CO2e through forestry and plantations. And all these targets are to be achieved on or before 2030.


MOMENTUM

As 2030 is quite far, India appears to meet these objectives through interim phases and in this way the current interim target is that of 175 GW of renewable energy capacity by 2022. To this end, India has laid emphasis on diverse areas namely (i) implementation of major programs in the field of solar e.g. Solar Parks, Solar Defense Scheme, installation of solar photovoltaic plants on canal top, solar pump etc. (ii) amendment of National Tariff Policy for electricity requiring (a) compulsory 8% power procurement from solar energy by 2022; (b) bundling of renewable power with power from plants whose PPAs have expired or completed useful life; (c) withdrawal of inter-state transmission charges for solar and wind power; (d) mandatory procurement of 100% power produced from waste-to-energy plants etc; (iii) imposition of “Clean Environment Cess” on coal and utilization of the cess proceeds for solar projects.

GROUND REPORT ENCOURAGING

The ground result of these transforming steps have been impressive. Based on 2016's data, India has already achieved 4th position in global wind power installed capacity after China, USA and Germany. As on October 31, 2016, India already has 46.3 GW grid-interactive power capacity and small hydro power capacity of 4.3 GW. In terms of capacity addition, 14.30 GW of renewable energy has reportedly been added in the last 2.5 years. In addition, 92305 Solar Pumps were installed and Rs.38,000 crore worth of Green Energy Corridor is being establish to facilitate evacuation of renewable energy.

BUDGET 2017-2018

With GST's potential to increase the cost of delivered energy and at the same time need of augmenting the momentum towards renewable energy, the budget seems to be an effort to maintain sufficient attraction in renewable energy sector.  Below are the greenergy boosters which this budget proposes:

Public Investment

1.  Indian Railways is establishing pilot plants for environment friendly disposal of solid waste and conversion of biodegradable waste to energy at New Delhi and Jaipur railway stations. 5 (Five) more of such solid waste management plants to be established;

2.  It is proposed to feed about 7,000 railway stations with solar power and the project has begun with 300 stations; and

3. Initiating second phase of Solar Park development for additional 20,000 MW capacity.

Solar/Wind/Bio-Energy/Fuel Cell

1. Withdrawal of BCD (Basic Customs Duty) from the current levy of 5% on solar tempered glass used for manufacturing solar cells/panels/modules;

2. Reduction in the CVD (Countervailing Duty) to 6% from the current levy of 12.5% on parts/raw materials used for manufacturing solar tempered glass for use in solar photovoltaic cells/modules, solar power generating equipment or systems, flat plate solar collector, solar photovoltaic module and panel for water pumping and other applications, subject to actual user condition.

3. Reduction of BCD to 5% and withdrawl of CVD and SAD (Special Additional Duty) from the current levy of 7.5%, 12.5% and 4% respectively on Resin and catalyst used for manufacturing cast components for Wind Operated Energy Generators WOEG subject to actual user condition.

4. Reduction of BCD to 5% and CVD to 6% from the existing range of 10%/7.5% and 12.5% respectively on all items of machinery required for fuel cell based power generating systems to be set up in India or for demonstration purposes.

5. Reduction of BCD to 5% and CVD to 6% from the existing range of 10%/7.5% and 12.5%  on all items of machinery required for balance of systems operating on biogas/ biomethane/ by-product hydrogen.

6. Reduction of excise duty to 6% from current levy of 12.5% on all items of machinery required for balance of systems operating on biogas/ biomethane/ by-product hydrogen.

It is expected that with GST coming into force from July 1, 2017, the cost of delivered renewable energy is going to increase. At the same time, keeping Paris commitments in scene, there is no option but to keep renewable energy an attractive sector. The Budget 2017-18 appears to be a serious effort to achieve this balance.

SOURCES:

Budget Speech by Hon'ble Finance Minister. Available at http://indiabudget.nic.in/ub2017-18/bs/bs.pdf

Economic Survey 2016-17, http://indiabudget.nic.in/es2016-17/echapter.pdf

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