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Transformational Budget for Transitional Energy Economy in India

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By: Subrahmanyam Pulipaka,

India, today is the world’s 4th largest Renewable Energy (RE) country and is 5th largest in terms of installed solar capacity. In early February 2022 India’s solar installations crossed the 50GW milestone making India only the 5th country to achieve this in the world. The year 2021 has been a landmark year for Indian renewable energy industry. In August 2021, on the eve ofIndependence Day, India achieved 100GW of installed RE capacity. Consequently, in December 2021, India became only thefourth country in the world to have 150GW of RE (including large Hydro). 2021 is also the year where India’sSolar installationscrossed 10GW capacity with 210% jump from 2020 making it the best year in India’s solar history, despite COVID related challenges.

Today, India is home to one of the World’s largest energy transition programs with targets that are both ambitious as well as pragmatic. Honourable Prime Minister ShriNarendra Modi at COP26 announced that India is expandingits RE target to 500GW by 2030. With only 9 years to go for this ambitious target, the budget 2022 has given the much-needed impetus to place Indian Renewable Energy (RE) sector at an advantage to achieve these targets.

Budget 2022 is truly transformational in giving boost to India’s Energy Transition Goals and the allied socio-economic benefits, especially when it’s transitioning to a Market Driven economy. The provisions for Renewable Energy in this budget are based on four key foundational pillars of Indian energy economy which are “Swavalamban (स्वावलंबन)”, “Samruddhi (समृद्धि)”, “Sashaktikaran ( सशक्तीकरण)” and “Shakti (शक्ति)”,

Swavalamban: Honourable Prime Minister Shri. Narendra Modi, gave the clarion call for self-reliant India (Atmanirbhar Bharat) in 2020. In line with this the Government announced a Production Linked Incentive (PLI) Scheme for high efficiency solar manufacturing in India. The outlay of this scheme in this budget is increased by Rs.19500 crores, making the scheme’s total outlay to around $3 billion USD.  This increment will definitely help accelerate India’s manufacturing capabilities to meet the growing demand for Solar Modules and Cells and potentially add at least 45GW of domestic manufacturing in the next 3 years making India a Global Solar Manufacturing hub. Additionally, a Basic Customs Duty (BCD) of 25% and 40% on imported solar cells and modules was also announced while extending the concessional tax regime of 15% until March’24. All these aforementioned provisions will give the much-needed momentum for domestic manufacturingand take India closer to become self-reliant in solar energy sector, thereby shifting from a decade long reliance on imports.

Samruddhi: India’s solar capacity grew 17 times in 7 years and this has only been possible due to Cohesive and Consistent policy measures of Indian government. This year’s budget has aggressively pushed the development curve of renewable energy sector by leaps and bounds. The announcement of issuing Sovereign green bonds for mobilising investments will cement India’s already existing reputation as world’s attractive destination for RE investments. The move to allow a fiscal deficit of 4 per cent of GSDP of which 0.5 per cent will be tied to power sector reforms, will go a long way into bringing more accountability in India’s RE sector, thereby contributing to its accelerated growth. Including energy storage systems with dense charging infrastructure and grid-scale battery systems in the harmonised list of infrastructure will lay the founding stone for making energy storage affordable in India.

Sashaktikaran: The provision of decentralized renewable energy and support for livelihood generation for Border villages with sparse population, limited connectivity and infrastructure is a right step in empowering rural population. It is also interesting to note that MNRE has recently released a framework for promotion of Decentralized Renewable Energy Livelihood Applicationswith an aim to create an enabling ecosystem for spread of Renewable Energy Generation technologies. The inclusion of Hydro and Solar power projects in the budget for the Ken-Betwa Link Project is a strong testament of  the Government’s resolve on integrating  Agriculture and Renewable Energy sectors while contributing significantly to doubling the farmers’ income.

Shakti:While Shakti means power, this budget’s focus on GatiShakti and NariShakti gave more power to Renewable Energy sector. While PM GatiShakti is a transformative approach for economic growth and sustainable development in India, Honourable Finance minister’s announcement that this approach will be powered by Clean Energy and Sabka Prayas is an encouraging news for the RE sector. RE sector can leverage GatiShakti platform to make India a global RE super power, while creating huge job and entrepreneurial opportunities for all, especially the youth.This year’s budget also recognized the importance of Nari Shakti (women power) that heralds optimistic future for women-led development in the RE sector. The revamped government schemes Mission Shakti, Mission Vatsalya, Saksham Anganwadi and Poshan 2.0 have improved infrastructure and are powered by clean energy providing enriched environment for child development.

Overall, this year’s budget is the right step forward to achieve “Panchamrit” vision that was outlined by Hon’ble Prime Minister during COP 26 which encompasses achieving target of 500 GW RE that will power half of India’s Energy requirements by 2030 while reducing carbon emissions by one billion tonnes and reduce carbon intensity by 45%  by 2030. Finally, all measures will have to converge to ensure India becomes Net Zero by 2070.

Author is the CEO, National Solar Energy Federation of India (NSEFI)

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