Budget 2025: New energy players expect incentives, policy boost

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Stakeholders in the new energy sector are expecting policy interventions, incentives and duty cuts on key raw materials from the upcoming budget. Industry leaders are calling for enhanced investments in transmission infrastructure, energy storage and domestic manufacturing to accelerate the country’s transition to green energy.

India has an ambitious target of reaching 500 gigawatts of non-fossil fuel power by 2030. This would mean that the government would have to add nearly 50 GW annually until 2030, or almost three times what it has been able to achieve in the post-covid-19 period.  Renewable energy installations must scale up from the current 28 GW annually to 50–60 GW per year, alongside ramping up of energy storage to a minimum of 20 GWh annually. This transformative shift will require an estimated $1 trillion investment over the next decade, according to Vineet Mittal, chairman of renewable energy company Avaada Group.

"New energy players in India seek clarity and consistency in regulatory frameworks to foster a stable investment environment. While electricity regulatory commissions have played a pivotal role in enhancing transparency, there remains a strong demand for more streamlined processes," said  Dibyanshu Sinha, partner, Khaitan & Co, a leading law firm.  He added that  the C&I or commercial and industrial sector has been at the forefront of adopting renewable captive power projects, making it an attractive area for incentives. However, the sector is facing challenges due to rising surcharges and other costs, which are pushing up the landed cost of power. A reduction in third-party open access charges would significantly benefit the industry, according to Sinha.

So far, the government has undertaken several steps to boost the growth of the renewable energy sector, including a PLI or production-linked incentive scheme with an outlay of Rs 24,000 crore, aimed at boosting domestic manufacturing of solar panels and modules. In 2024, India achieved a record renewable energy capacity addition of approximately 30 GW, bringing the total installed capacity to 209.44 GW by the end of the year.

However, power evacuation infrastructure growth in India has lagged the pace of power capacity additions due to unique challenges faced by transmission projects, with implementation delays running into several months and even years, according to market research firm Mercom.

“Subsidies for energy storage, smart grid technologies and discom (distribution company) modernisation will be critical for grid stability and efficient renewable energy integration,” said Raju Kumar, partner and energy tax leader, EY India.

Industry players also emphasised the urgent need to implement the third phase of the interstate Green Energy Corridor (GEC) to ensure the efficient evacuation and transmission of renewable power.

“The rollout of GEC Phase III is crucial for strengthening interstate transmission systems, especially in renewable-rich states such as Rajasthan, Madhya Pradesh, Gujarat, Maharashtra and Andhra Pradesh. A coordinated plan between state and central authorities is essential to enable timely power evacuation and ensure efficient transmission aligned with renewable energy generation,” Mittal added.

Meanwhile, Senvion, a wind energy company, flagged the need to have a PLI scheme tailored for original equipment manufacturers and component manufactures to enhance large-scale turbine manufacturing. As of now, wind energy players have benefitted from incentives such as tax holidays, generation-based incentives, accelerated depreciation benefit, concessional customs duty exemption on some components, etc.

“Reducing customs duty on imported materials, standardising the GST (goods and services) rate for wind turbine generators and aligning direct tax incentives with the existing 15 percent corporate tax rate under Section 115 BAB will ensure financial clarity and promote investments,” said Senvion managing director Amit Kansal.