Budget analysis 2017-2018
Let us take a look at the Budget and its ramifications, says R Srinivasan.
The last two years have witnessed an increase in the share of solar in the country’s energy mix. The industry has also managed to drive tariffs down from Rs 12 a kilowatt hour in 2010 to a historic low of Rs 3 in 2016. Now in Budget 201718, Finance Minister Arun Jaitley has announced a series of measures such as 20 gigawatts (GW) of solar capacity addition and solarising about 7,000 railway stations in the medium term apart from higher spending on rural electrification, among other measures. In October 2016, RE made up 15 per cent of India’s installed electricity production capacity, up from 13.1 per cent in August 2015, according to government data. To achieve its target, India must add 130.76 GW of renewable energy over the next six years, an average of 21.7 GW per year or, three times the capacity it added in 2016. The power sector’s expectations and what policies Budget 2017 should have contained have been covered in extensive detail in our comprehensive Industry Speak section.
Queried about Budget 2017, Rudranil Roy Sharma, GM and Senior Consultant and Aditya Ravindran, Consultant, (Energy Vertical), Feedback Business Consulting Services Pvt Ltd, said, “The present government has been taking good care of the power sector for the last 2½ years. Due to the strategic nature of investments and incentives that had been announced for the energy sector in the past budgets, expectations of the power industry with this year’s budget were low. We feel this year’s budget has hit all the right notes and reiterated intent. The budget has promised to bring with it a strong fillip for the infrastructure segment. Among the many infrastructure plans, the power sector was also able to bag some initiatives that would leave a lasting impact. Renewable energy and Power for All have been flagship schemes of this Government’s Ministry of Power for the past few years. This year too, their commitment towards these missions has been reiterated through this budget announcement. The Government has proposed to implement another tranche of solar power capacity addition to the tune of 20,000 MW through its second phase of Solar Park scheme.
The government continues to stand by its promise to electrify all the villages in the country by May 2018. In this regard, an increased allocation of Rs 4,814 crores has been proposed under the Deen Dayal Upadhyaya
Gram Jyoti Yojana during this year.
At the same time, the Indian power industry has been seeing subdued growth in the off-take of power. The result has been that the power plants are struggling under mediocre capacity utilisation values/plant load factors. High investment in infra (rail, road and shipping), housing, and agriculture in this budget will generate more demand for electricity in the country and help the cause to a great extent.
The budget also proposes to cut down import duty on certain capital equipment goods. Fuel cell based power generating system, balance of systems operating on bio-gas / bio-methane / byproduct hydrogen are few such technologies. The reduced import duties would definitely help to grow these futuristic renewable technologies.
Among the popular power generation technologies, solar and wind energy have received a small quantum of relief from import duties. Tempered glass used on solar photovoltaic panels, and some of the resin and catalyst used in cast components for wind energy equipment have been earmarked for reduction in import duties. Although, this reduction would only have a tiny impact on solar and wind power developers, the actual benefit here is being aimed at promoting the manufacturing base for the equipment used in these industries.
The integrated rail budget plans to take the Indian Railways light years ahead of its current position. On the energy front, the railways have been trying to improve reliance on renewable energy. As part of the previous budgets, the railways had proposed to power 7,000 of its stations with solar power. Of these, 300 stations have seen some developments in this regard and it is proposed that works in another 2,000 stations would be taken up during the coming year.
Similarly, another initiative on the part of the railways – Swachh Rail, waste-to-energy based projects are now being introduced in the railway sector. The budget proposes to act on five such projects depending on the success of pilot projects being carried out at Delhi and Jaipur railway stations.
The lowering of corporate tax from 30% to 25% for companies with an annual turnover up to Rs 50 crore will help the MSME sector and promote entrepreneurship. It is commendable that with this move, the government is cutting some slack for close to 6.67 lakh companies that fall into this bracket while forgoing revenue of about Rs 7,200 crores.
In the energy domain, organisations involved in village electrification/ microgrid, energy audits, demand side management, energy consulting activities etc, will be benefited due to this. Although, this year’s budget does not plan to take any large strides for the power sector, the small steps that have been taken add up to a package that satisfies almost all the stakeholders in the power sector value chain. And this in itself is a job worth of high praise.”