• The MNRE has come under fire from a standing committee on energy of the Indian Parliament that has expressed its concern on India missing its renewable energy targets for three consecutive years
  • It points out the flaws in the policies and systems that if not heeded now could derail the renewable energy program of the country
  • It singles out the rooftop solar segment as the achievement till October 15, 2019 has only been 11.5% of the total targeted 40 GW
  • Committee suggests the government should formulate a separate manufacturing program to support local solar industry
  • Its recommendations include separating loan basket for renewable energy and conventional power

A Standing Committee on Energy constituted by the Indian Parliament has ripped apart the Ministry of New and Renewable Energy (MNRE) for failing to achieve its yearly targets and poor financial planning in its First Report on Demands for Grants of the Ministry of New and Renewable for the year 2019-20 submitted to the House of Representatives or Lok Sabha. Some of the key observations and recommendations as listed in the report are as follows:

Falling short of renewable energy targets

In the report, the committee expressed its ‘deep concern’ on the ministry not being able to meet its annual targets for renewable energy for three consecutive years namely FY 2016-17, 2017-18 and 2018-19. For instance, against the 15,355 MW target for the FY 2018-19, the ministry reported renewable energy installations of 8,519.52 MW, falling short of itstarget by 44.5%.

This, the committee, argued could hamper the entire mission of achieving 175 GW of renewable energy by the end of 2022 which ‘may reflect poorly upon the commitment and sincerity of the ministry’.

It suggests identifying weak areas and continuous monitoring of the implementing agencies.

Rooftop solar progress dismal

By the year 2022, India has braced itself to achieve 100 GW of solar power capacity comprising 60 GW of utility scale and 40 GW of rooftop solar capacity. This means by the FY 2018-19, India’s rooftop solar power capacity deployment should have been 16 GW but it was reported to have reached only 1,826 MW by October 15, 2019, that’s translating into 11.5% of the total target.

“The committee are highly disappointed with the dismal performance of the ministry in this sector. The committee feel that rooftop systems are not remunerative due to high maintenance cost and delay in disbursement of subsidy,” stated the committee. “The committee are of the considered view that the ministry should give this program a serious relook, otherwise it will derail the entire National Solar Mission.”

Members of the committee recommend simplifying the process of subsidy disbursement and widely publicizing benefits of rooftop solar that comes with government incentives to help the segment take off.

Need dedicated solar manufacturing program

Taking note of the fact that the Indian solar market is dependent on Chinese equipment to meet 85% of its needs along with products from Vietnam and Malaysia – and that India manufactured solar products are not as competitive, the committee has recommended the ministry to support domestic solar manufacturing under a dedicated program that must be formulated. In the continued over-reliance of the domestic industry on a single foreign country creates the risk of ‘disruption in supply chain and cripple indigenization of the sector’.

The government has hitherto been supporting domestic solar manufacturing industry by way of imposing safeguard duties on foreign products, and by making it mandatory for locally produced solar cells and modules to be used for 12 GW Central Public Sector Undertaking (CPSU) Phase-II scheme (see India To Develop 12 GW Solar PV With Local Modules).

Separate RE loan basket from conventional power

There is as much as INR 97 billion ($1.35 billion) due to be paid to solar and wind power generators by states/discoms. If these payments don’t fail to materialize timely many such projects stand the danger of turning into non-performing assets (NPA). To deal with this, it nudges the ministry to initiate discussions with the states and come up with relevant guidelines to ensure timely payments.

The committee also suggests separating loans for renewable energy and conventional power sector that are currently clubbed together under the same loan basket and loan limit.

Insufficient utilization of budget

Pointing fingers at the ministry for poor financial planning, the committee said it has been unable to fully utilize the budgetary allocations, even the reduced allocations for the last three years have been under-utilized. It recommends exhaustive utilization of allocated funds and identification of weak areas on the basis of the ministry’s performance during the previous years.

Confusion regarding GST

Echoing the solar power industry’s sentiments regarding the applicable rate of goods and services tax (GST), the committee observed the ambiguity as renewable energy devices and spare parts have been put under a 5% GST slab while the effective rate has come out to be about 9%. This confusion is not healthy for the renewable energy sector, it said. “Such a situation will lead to increase in generation cost and pose a threat to the viability of the ongoing projects, ultimately hampering the target achievement,” reads the committee’s recommendations. “The Committee wants the Ministry to take up this matter with the Ministry of Finance on urgent basis.”

This report reminds one of the previous Parliamentary Committee reports from July 2017 that criticized slow progress of the solar program helmed by the ministry and called on to reconsider its unrealistic 40 GW rooftop solar target (see Indian Parliament Criticizes Solar Program).    

Back in October 2019, the MNRE had hit back at a CRISIL forecast for the country to fall short of its 175 GW renewable energy target by 42% and issued an official statement calling the doubts about India’s ability to achieve the target as ‘ill-founded’, factually incorrect and lacking in credibility (see MNRE Hits Back; Says India Will Exceed 175 GW RE Goal).