Pitch Report: Renewables industry hopes Budget 2025 will boost local-production

Analysts pointed out that higher allocation and improved support for financing will not be sufficient. The government will also need to address the execution issues.

The renewable industry is expecting a push for local manufacturing in the coming Union Budget.

On February 1, the Finance Minister Nirmala Sitharaman will announce the Union Budget 2025-26.

Market experts Moneycontrol spoke to said that they are hoping the government will incentivise local manufacturing in new and emerging spaces within renewables, and address execution challenges in the rollout of clean-energy adoption.

In this fiscal, the allocation to the Ministry of New and Renewable Energy (MNRE) was approximately Rs 19,100 crore, which was a whopping 143 percent increase over the revised estimate of the previous fiscal.

From this, the largest share, or around 45 percent, went towards building solar grids; and the second-highest allocation of around 33 percent went to solar-powering households under the PM Surya Ghar Muft Bijli Yojana.

Also read: MC Exclusive | Green energy budget may increase by at least Rs 10,000 crore 

This time, industry insiders are hoping for more support for battery storage. Currently, there is a production-linked incentive scheme to support battery production but the industry is also hoping for duty-based support.

In the last Budget, the Finance Minister had announced a waiver of import duties on 25 minerals, including lithium. This move was widely applauded by the EV industry. In this Budget, the battery makers are hoping that imports of batteries from China will be taxed more, to protect the domestic manufacturers.

Another ask from the industry is a higher allocation for renewable projects because, as Rupesh Sankhe of Elara pointed out in a conversation with Moneycontrol, these are long-term technologies, with 10-15 year horizon and which require high capital costs and expertise.

"The government has to allocate  more to encourage private and PSU participation," he said.

Besides higher allocation, Sankhe highlighted the need for supporting financing through green bonds. He said, "Given the high capital requirements for capacity addition and infrastructure investment, green bonds could play a vital role".

Analysts pointed out that higher allocation and improved support for financing will not be sufficient. The government will also need to address the execution issues.

Satyadeep Jain of Ambit said that year-to-date 14 gigawatts of renewable energy was installed, and even with the faster execution that typically happens in the fourth quarter, we can expect only 20-25 GW of capacity added for FY25.

He said, "Land acquisition and transmission remain significant constraints, along with delays in equipment procurement and power-purchase agreement (PPA) signings by distribution companies (DISCOMs)."