Budget 2024: Power sector seeks boost to renewable energy projects and financial support for discoms

The power sector expects a continued focus on renewable energy projects and financial thrust for power distribution companies (discoms) in the upcoming Union Budget, which will be presented by Finance Minister Nirmala Sitharaman on July 23.

With India’s aim of achieving 50 percent cumulative installed power generation capacity from non-fossil fuel sources by 2030, the government has been inclined towards increased spending in the renewables sector.

To achieve the target, the country needs to add about 50 gigawatts (GW) per annum of renewable energy capacity for the next five years, starting in 2024. So far, India has been able to add only about 15 GW each year.

“As we approach the Union Budget 2024, we anticipate strategic initiatives that will drive growth and sustainability. We hope to see significant allocations towards renewable energy projects, enhanced grid infrastructure, and innovative technologies. Additionally, policy reforms aimed at reducing regulatory bottlenecks and promoting private investment will be crucial,” said Kush, CEO of Essar Power.

In the interim Budget 2024, presented by Sitharaman on February 1, the Centre's schemes for the power sector, including renewables, received an allocation of at least Rs 28,352 crore, up 50 percent from the revised estimate (RE) of Rs 18,945 crore in 2023-24. Power sector initiatives (under the Ministry of Power) got a 40 percent hike from Rs 11,359 crore to Rs 15,861 crore.

Continued RE focus

Rajeev Kashyap, VP and MD of Nextracker, said he expects the new government to reaffirm its commitment to renewable energy, particularly in innovation, local manufacturing, technological integration, and R&D within the solar energy sector.

“This focus is essential for unlocking the nation’s clean energy potential, de-risking the supply chain, and enhancing the reliability of solar power systems. Further, lowering GST rates on solar devices and systems would not only spur domestic manufacturing but also amplify project returns, driving economic growth,” said Kashyap.

The industry is also hopeful of announcements related to wind energy, which is still in the nascent stages in India, including developing advanced wind turbine technology and supporting ecosystems for offshore wind energy.

Pradip Kumar Das, CMD of IREDA, said the government is expected to continue its focus on targeting 50 GW annual bidding for solar and wind projects till 2028 and enhance its sustainable financing to support RE growth, particularly in areas of distributed RE installations and localising the supply chain.

Push for financial assistance for discoms

Considering they are operating under high debt, the power industry has asked for a focus on a comprehensive turnaround of discoms.

“Many initiatives have been taken in the past to incrementally improve the situation, but we expect strong steps in this direction to ensure the sector's well-being. Pushing for full retail competition should be a focus. To maintain the momentum built in the last 5 years, it'll be paramount to extend full ISTS waiver for another 2 years for sustaining RE adoption by all categories of power consumers,” said Pratik Agarwal, MD, Sterlite Power.

Raju Kumar, Energy Tax Leader at EY India, said to bolster the ambitious rooftop solarisation project, discoms may receive financial thrust to develop a country-wide infrastructure for transmission and metering. Launched in February, the PM Solar scheme aims to install rooftop solar panels in 1 crore houses in India. The government announced an investment of over Rs 75,000 crore, which would provide up to 300 units of free electricity every month.

Additionally, the sector also expects announcements on the removal of coal cess and continued focus on battery energy storage systems (BESS).

“BESS are essential for advancing India’s renewable goals. Previous budgets have significantly increased funding for the advanced chemistry cell sector, showing the government's commitment to energy storage. We anticipate continued support for cell manufacturing and BESS, along with Production Linked Incentives (PLI) for raw material processing,” said Anmol Singh Jaggi, Chairman and Managing Director, Gensol Engineering Ltd.