Budget 2024: Power sector wants policy consistency, lower GST rates, easy access to subsidies

Budget- Power Sector

The power, renewables, and new energy sectors are hopeful that the government will continue to focus on green energy initiatives in the interim Union Budget, which will be presented on February 1.

The budget will be a vote-on-account in view of the general elections slated for April-May 2024.

A vote-on-account enables a government that is completing its term to fund its expenses for the short period until a full budget is passed.

Union finance minister Nirmala Sitharaman has already stated that “no spectacular announcements” should be expected from the upcoming budget as the full budget for FY25 will be presented after the formation of a new government.

Yet, the power and green energy industry is hopeful that the government will ensure policy consistency, focus on green hydrogen, lower goods and services tax (GST) rates, and easy access to subsidies and climate finance.

Additional funds for green hydrogen

According to Derek M Shah, Senior Vice President & Head, L&T Energy (Green Manufacturing & Development), the government’s focal point should shift towards green hydrogen since, over the years, it has steadfastly supported the renewable energy sector, notably solar and wind, leading to a significant expansion in their installed and manufacturing capacities.

“Implementing a green hydrogen-blending mandate for identified industries like refineries, fertilisers, and manufacturing and reducing the GST rate for electrolyser manufacturing from the current 18 percent is important for the growth of the sector,” he said.

Initiatives to facilitate and encourage the seamless export of green hydrogen and its derivatives and inclusion of green hydrogen and electrolyser manufacturing within priority sector lending are crucial to enhance access to credit for such projects, Shah said.

Sustained focus on renewables

Dilip Panjwani, Chief Financial Officer, Waaree Renewable Technologies Ltd (WRTL), said that with India’s ambition to have 500 GW of installed renewable capacity, the government must offer policy incentives for energy storage solutions for maintaining round-the-clock grid stability.

The Union cabinet had, on September 6, 2023, approved the Ministry of Power's proposal to offer a viability gap funding (VGF) of Rs 3,760 crore for building battery energy storage systems (BESS), with a total capacity of 4,000-megawatt hours (MWh). But the same is yet to be implemented.

Gyanesh Chaudhary, Chairman and Managing Director, Vikram Solar Ltd, said lower interest rates for the renewables sector, coupled with innovative financing models, will strengthen the capability of developers and equipment suppliers to compete in line with global standards.

“The government should also look at easing the process for availing subsidies and clearances for rooftop solar power for the commercial and industrial (C&I) segment, simplifying land acquisition, and making tariffs attractive to boost investor confidence,” Chaudhary said.

Rajeev Kashyap, VP & MD Nextracker India, said the Approved List of Models and Manufacturers (ALMM) should be promptly brought back to infuse competitiveness and innovation in the solar industry.

Amit Jain, CEO and Country Manager at ENGIE India, said that the government should focus on continued stable and long-term policies to instill confidence among stakeholders and ensure a robust foundation for the renewable energy market.

Funds for transmission and financial health of discoms

According to Pratik Agarwal, MD, Sterlite Power, the health of the power sector ultimately rests not on how much the network generates or transmits, but on the health of the country’s distribution companies (discoms).

“The budget should ensure that states are incentivised to reform the distribution sector and most of the fiscal benefits should be linked to reforms in this space,” Agarwal said.

Chaudhary said that modernisation of the grid infrastructure is also essential to enable efficient integration of renewable energy.

Extension of concessional corporate tax rate

Jimit Devani, Partner, Tax, Deloitte India, said that the government should at least have an extension on the concessional corporate tax rate of 15 percent under Section 115BAB, which is expiring on March 31, 2024, in order to have clarity on the overall budget planning for new renewable energy projects.

Section 115BAB of the Income-Tax Act, 1961, is a provision that offers a concessional tax rate of 15 percent to new domestic companies engaged in manufacturing or producing goods in India. This provision was introduced in Budget 2019 to boost the manufacturing sector and attract new investments.