Solar News & Trends

BUDGET 2021 for Energy – Renewables

By : pixon February 15, 2021

'Faith is the bird that feels the light when the dawn is still dark.’

Is the Faith in Renewable Hopeful with Budget 2021-22?

With a lot of Hope to look further in 2021 and leave behind the 2020 blues, FM Sitharam proposed the Budget 2021-22. The BSE & NSE boosts portrayed the happiness of the investors and the acceptance of the proposed budget.

Here is a quick overview of the Budget fueling growth in the Energy Sector of India with focus on renewables.

  • Uplift DISCOMS & DE license Electricity Distribution
  • The PLI scheme for AtmaNirbhar Bharat
  • Basic Custom Duty Increase on Imports
  • Solar inverters from 5% to 20%
  • Solar lanterns from 5% to 15%
  • Additional capital infusion of
  • Rs.1,000 Cr to Solar Energy Corporation of India (SECI)
  • Rs.1,500 Cr to Indian Renewable Energy Development Agency (IREDA)

Uplift DISCOMS & DE license Electricity Distribution

Government has massively funded DISCOMs to uplift their loss-making status and upgrade the entire eco-system.

The government has dropped proposal on direct benefit transfer (DBT) of subsidy to electricity consumers and instead would first de-license the Electricity Distribution.

The consumers can select their own distribution company. However, it will not disrupt the existing licenses.

This move is intended to induce competition in electricity distribution and empower consumers to switch networks but will not disrupt the existing licenses.

In all, it will also induce fair competition and address monopoly concerns.

It will also assist DISCOMs for infrastructure creation tied to financial improvements, including prepaid smart metering, feeder separation, and up-gradation of systems.

The PLI Scheme for AtmaNirbhar Bharat

PLI stands for Production Linked Incentive Scheme that is devised to enhance the AtmaNirbhar Bharat drive.

The motto is to promote the growth of manufacturing industries to become an integral part of the global supply chain.

The government has committed Rs.1.97 lakh crores in 13 sectors and the PLI is launched to create the manufacturing global champions.

The energy sector has been dedicated with 24%, Rs.4,500 crores for ‘High Efficiency Solar PV Modules’ which will be implemented by MNRE (Ministry of New & Renewable Energy).

Considering the current scenario of solar industry, the domestic manufacturing industry has limited annual capacity of around 2,500 MW for solar PV cells and about 10,000 MW for solar PV modules.

The manufacturing too moreover depends upon imported solar PV cells, PV modules and other raw materials.

Thus, the scheme is proposed to boost the domestic manufacturing needs and further create demand for locally produced balance of raw materials like EVA, Solar Glass, Backsheet, Junction Box, etc. to augment the entire Solar Manufacturing Eco-system.

NIP Projects by sector

Basic Custom Duty Increase on Imports

  • Solar inverters from 5% to 20%
  • Solar lanterns from 5% to 15%

The custom duties are increased to combat the imports and promote the domestic manufacturing focusing on the AtmaNirbhar Bharat mission.

This did not meet the expectations of more elaborate support for RE industry and especially solar industry.

SECI & IREDA Funding

The budget has Additional capital infusion of:

  • Rs.1,000 Cr to Solar Energy Corporation of India (SECI)
  • Rs.1,500 Cr to Indian Renewable Energy Development Agency (IREDA)

As part of Intended Nationally Determined Contributions (INDC), India targets to reduce carbon emissions intensity of its GD by 33-35% as against 2005 level.

It targets to install at least 40% of its electricity generation capacity through non-fossil sources by 2030.

The budget infusion would help the SECI & IREDA’s – the apex bodies for Indian renewables in contributing initiatives to fulfill the set ambitious targets.

SECI Funding PurposeIREDA Funding Purpose
Considering the outlay of 2020 budget, SECI has floated about 47,000 MW of capacity with an investment of Rs.2.14 lakh crore (approximately). About 8,300 MW of capacity has been commissioned and the numerous projects are under various stages of implementation.The average installation is expected to be in the range of 30-50 GW per annum, which would require annual debt capital of about one lakh crore.
It will enable SECI to float 15,000 MW of tenders on yearly basis. It will attract investment of more than Rs.60,000 crore, generate employment of 45,000 job years and reduce emissions of 28.5 million tons of CO2 per year.It will also help in financing of around 4,500 MW of RE projects worth Rs.18,000 to 19,000 crore. It will generate employment of 13,500 job years and reduce emissions of 8.55 million tons of CO2.

Capital infusion will also enable SECI to set up innovative projects of with an investment of around Rs.17,000 Cr.

The International lenders are happy to channelize their funds to India’s large RE market through IREDA. Thus, it will enable IREDA attract and keep intact with the foreign investors.

Summing Up The BUDGET 2021 for Power Sector

Only 3 times in the past the budget has followed a contraction in Indian economy. This time it's because of a global pandemic like in other countries. The government is fully prepared to support and facilitate the economic reset.

Budget 2021 has focused on growth, investment and jobs. The renewable sector, especially solar manufacturing and related services has got the keen eye from investment prospect which will help to create jobs.

The reviews of all the investors and solar industry delegators reassure that the faith for better recovery of the declined repo rate is up and high.