Home/ Politics / Policy/  Budget stresses on clean energy sources

New Delhi: In sync with the Narendra Modi-led government’s aim to promote clean energy, finance minister Arun Jaitley on Thursday unveiled a detailed road map for harnessing India’s renewable energy resources. The strategy, aimed at contributing to India’s energy security, includes schemes such as setting up ultra mega solar power projects, developing solar parks on canal banks, constructing transmission corridors for renewable energy and energizing 100,000 solar power-driven agricultural pump sets and water-pumping stations.

To encourage the setting up of clean energy projects, Jaitley also provided excise duty exemptions for raw materials for solar and wind power projects.

India’s National Action Plan on Climate Change recommends that the country generate 10% of its power from solar, wind, hydropower and other renewable sources by 2015, and 15% by 2020.

“New and renewable energy deserves a very high priority. It is proposed to take up ultra mega solar power projects in Rajasthan, Gujarat, Tamil Nadu, and Ladakh in J&K. I have set aside a sum of 500 crore for this. We are launching a scheme for solar power-driven agricultural pump sets and water pumping stations for energizing one lakh pumps. I propose to allocate a sum of 400 crore for this purpose. An additional 100 crore is set aside for the development of 1MW (megawatt) solar parks on the banks of canals," Jaitley said in his speech.

Developing renewable energy will also help reduce dependence on coal, which is in short supply domestically, requiring imports of the mineral to fuel most of India’s power plants. India has a power generation capacity of 2,48,510MW, of which only 13%, or 31,692.14MW, is contributed by renewable sources.

Jaitley also increased the quantum of clean energy cess which is currently levied on coal, peat and lignite from 50 per tonne to 100 per tonne and expanded the scope of its usage to include financing and promoting clean environment initiatives and funding research in the area of clean environment. The increase in cess may result in electricity tariff increase. In addition, the budget announced a rationalization of customs duty on coal and an exercise to streamline coal linkages to optimize its transportation.

The Bharatiya Janata Party (BJP), which leads the new government, had made energy security a part of its poll plank. India, which is dependent on imports to meet its energy demand, has an energy import bill of around $150 billion. This is expected to reach $300 billion by 2030, requiring a $3.6 trillion payout by 2030.

“We need to maximize our utilization of solar power. The existing duty structure incentivizes imports rather than domestic manufacture of solar photovoltaic cells and modules," Jaitley said.

The Union budget extended the concessional basic customs duty of 5% for setting up solar power generation projects. Similarly, to promote wind power generation, Jaitley reduced the basic customs duty to 5% from 10% on forged steel rings used in the manufacture of bearings of wind-operated electricity generators, along with exempting the 4% special additional duty (SAD) on parts for manufacturing wind generators. In addition, the budget provided for a concessional basic customs duty of 5% on equipment for setting up compressed biogas plants.

Experts, along with the industry, welcomed the move.

“The proposals for power sector presage a positive direction, to enhance energy security through renewable energy sources with both, large-scale projects and distributed projects, and transmission lines connecting green energy corridors to load centres," said Kameswara Rao, leader-energy, utilities, mining at PwC India.

“The government’s focus on clean energy in the budget has been very holistic and, therefore, a step in the right direction that will provide strong impetus for the industry," added Sumant Sinha, chairman and chief executive officer, ReNew Power.

In addition, to encourage clean thermal electricity generation, the National Democratic Alliance (NDA) plans to spend 100 crore for developing “Ultra-Modern Super Critical Coal Based Thermal Power Technology". In an attempt to attract investors, the budget also extended the 10-year tax holiday to projects that start operations by 31 March 2017. Supercritical equipment having a capacity of 660MW and above help in improving plant efficiencies and achieve economies of scale, besides being environment-friendly. State-owned NTPC Ltd, along with Bharat Heavy Electricals Ltd and the Indira Gandhi Centre for Atomic Research, is involved in setting up an advanced ultra-supercritical 800MW equipment prototype by 2017.

In another development to promote the usage of branded petrol, the budget reduced the central excise duty from 7.50 per litre to 2.35 per litre.

The Modi-led government’s energy security plans include harnessing renewable sources such as solar energy, biomass and wind power along with coal, gas, hydropower and nuclear power to bring about an “energy revolution" in the country.

Utpal Bhaskar
"Utpal Bhaskar leads Mint's policy and economy coverage. He is part of Mint’s launch team, which he joined as a staff writer in 2006. Widely cited by authors and think-tanks, he has reported extensively on the intersection of India’s policy, polity and corporate space.
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Updated: 10 Jul 2014, 11:46 PM IST
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