Solar Power Figures Big In Indian Budget 2021-22

India has presented its annual budget for 2021-22 offering a mixed bag for the solar power industry that holds huge promise for the country. The new budget will come into effect from April 1, 2021.

With the deadline of December 31, 2022 looming on the horizon for the country to achieve its targeted 175 GW renewable energy capacity of which 100 GW is to come from solar, Union Minister of Finance and Corporate Affairs Nirmala Sitharaman approved major capital infusion for implementing agencies for solar power in the country.

While the Solar Energy Corporation of India (SECI) has been approved an additional capital infusion of INR 10 billion ($137 million), the Indian Renewable Energy Development Agency has bagged INR 15 billion ($205.5 million) for the year.

To encourage domestic production of solar power products, the minister raised customs duty on solar inverters from current 5% to 20%, and on solar lanterns from 5% now to 15%. This will come into effect from February 2, 2021. However, solar power project developers should heave a sigh of relief as Sitharaman's speech did not broach the subject of basic customs duty (BCD) on imported solar cells and modules which is what they wanted (see India PV News Snippets: Tata, AGEL, Kawatha, Budget).

The government plans to come out with a phased manufacturing plan for solar cells and solar panels in order to build up domestic capacity. The finance ministry added that exemption to all items of machinery, instruments, appliances, components or auxiliary equipment to set up solar power generation projects is being withdrawn.

Pointing at the frail financial condition of the country's electricity distribution companies, Sitharaman said her government will put in place a framework to end discom monopoly in order to promote competition as well as to give consumers alternatives to choose from among more than 1 distribution company.

"A revamped reforms-based result-linked power distribution sector scheme will be launched with an outlay of INR 3.05 trillion ($41.92 billion) over 5 years. The scheme will provide assistance to DISCOMS for Infrastructure creation including pre-paid smart metering and feeder separation, upgradation of systems, etc., tied to financial improvements," said Sitharaman.

In keeping with the global movement to start producing renewable hydrogen, India too will launch a Hydrogen Energy Mission in 2021-22 to generate hydrogen from green power sources.

Some reactions to the budget

AMP Energy India's CFO SK Gupta hailed the positive developments focused on discom revival and opening up of the power sector to competition and new technologies, but complained that old pending requests for rationalization of GST to a lower 6.30% composite rate and deferment of CCD's on solar module imports have not been considered.

"Also, Renewables and Solar should be defined  as a part of "Infrastructure" and new DFI for infrastructure funding should be permitted to lend to new Renewable/Solar projects also. We suggest the Govt. should review these and come out with required modification in relevant laws to help Renewable/Solar IPPs," opined Gupta.

Another view came from Amplus Solar's COO Guru Inder Mohan Singh who called the capital infusion for SECI and IREDA along with the hydrogen strategy a booster shot for the renewable energy sector, but added that the increase in duty on inverters could have been increased gradually so that the industry is prepared.