Indian prime minister Modi’s first full budget has been given a lukewarm reception from the solar sector.
Delivered by finance minister Arun Jaitley on Saturday, the budget was full of support for “infrastructure”. While there was little detail on investments in the country’s grid network, the 175GW renewable energy target – including 100GW of PV – has been built into the budget.
Vineet Mittal, vice chairman of developer and EPC firm Welspun Renewables, broadly welcomed the budget.
“The National Investment and Infrastructure Fund (NIIF) with an annual flow of Rs 20,000 crore (US$3.2 billion) has been announced and this will help raise investments as equity in infrastructure finance companies which can further fund the renewable projects at competitive pricing. This could be used to develop a sizeable IDF to fund the huge capital outlays required to achieve the target of 175GW by 2022,” he said.
Mittal also pointed to the doubling of a tax on coal as an additional source of funds for clean power projects.
“The infrastructure sector has been facing funding challenges and some of the measures introduced will surely help this situation. By doubling the cess on coal to Rs 200 per tonne (US$3.23), the government is creating an additional corpus of funds for clean energy projects. Rs 75,000 crore (US$12.1 billion) has been apportioned for infrastructure sector.”
Much of this funding is labelled as “infrastructure” and there is an absence of language guaranteeing this will be funnelled towards clean energy projects and the necessary supporting grid investments.
Consultancy firm Bridge to India points out that the coal tax in particular has not been spent on renewable projects in the past. It also notes that while the price of coal remains artificially low, a bigger opportunity to send a price signal is missed.
In its post-budget analysis it also laments the lack of investor support that has been granted to other sectors.
“…There are no specific measures for renewables. For instance, there are now tax-free bonds for rail and roads, but not for renewables. In light of the government’s earlier emphasis on providing financing solutions to achieve the ambitious renewables targets, this is surprising,” the firm said.
A recent government-backed renewable energy investment conference saw a number of developers and local governments make pledges for project deployment but there was little concrete action. Bridge to India considers the budget to have followed a similar path.
“The government wants to see 100GW of solar and 70GW of wind built in the next five years. These are very ambitious goals and there is absolutely nothing in the budget to suggest how this might be achieved,” it said.