Renewable sector seeks incentives, tax waivers in Budget 2024

Union Budget for 2024-25 needs to focus on policy interventions, duty reductions and rationalisation of taxes in renewable energy sectors like rooftop solar, batteries, green hydrogen, electricity transmission and distribution and the creation of a skilled workforce, say industry experts.

One major concern of the solar sector is on completion of existing solar projects with imported equipment, following the reintroduction of the Approved List of Models and Manufacturers (ALMM) to favour domestic solar equipment manufacturers. In April, the Government re-introduced Basic Customs Duty (BCD) for solar cells at 20% and for solar modules is 40%, after suspending the move for a year to allow existing solar projects to be completed with imported equipment, mainly from China. "With ALMM in place, there must be a rationalisation of GST across all components of the solar sector, and the government should consider eliminating the BCD on solar modules," says Sharad Pungalia, managing director and CEO of Amplus Solar.

India aims to install 500 gigawatts (GW) of renewable energy projects by 2030. "Currently, we are at approximately 194 GW and to achieve this ambitious target, will require strong policy support and a proactive government push," says Rakesh Jha, partner, Energy Sector Solutions, Sustainability and ESG, BDO India. Continuation of effective policies such as the waiver of Inter-State Transmission System (ISTS) charges and zero customs duty on ingots and other materials for solar module production is crucial, he says.

Another demand is to provide incentives to domestic manufacturers of rooftop solar makers in the wake of the 'PM Surya Ghar Yojana' to solarise one crore homes. The scheme offers subsidies up to 40% of the installation cost with additional financing options to further ease the adoption in tier 2 and tier 3 markets. At present the Indian solar rooftop market is dominated by Chinese companies like Growatt, Solis, Sungrow and GoodWe. "Providing incentives to local solar cell manufacturers will be important because it ensures that supply will keep up with the upcoming demand for solar modules with made-in-India cells," says Saurabh Marda, founder and managing director, Freyr Energy.

With more intermittent renewable energy coming to the grid, the budget should support storage solutions to address green power unavailability during peak times. Implementing a storage obligation and reducing duties on batteries, along with other fiscal incentives, will help lower storage costs and enhance grid resilience, says Jha.

Arun Awasthy, president and managing director, Johnson Controls India, notes that the focus should be on sustainable development strengthening the energy efficiency of India’s building infrastructure (built environment), considering its potential to bring down the national carbon emissions disproportionately. "Additionally, provisions to bolster the skilling and innovation initiatives about green technology will be key in bridging the existing gaps," he says.

In the case of green hydrogen, experts point out that incentive schemes under the National Green Hydrogen Mission have been set up to provide supply-side measures to bring down electrolyser and component costs. The Strategic Interventions for Green Hydrogen Transition (SIGHT) program is progressing with projects being awarded to successful bidders for electrolyser manufacturing and green hydrogen production facilities. However, the cost difference between conventional hydrogen compared to green hydrogen, the sector is still evolving and current cost viability are major deterrent to the adoption of green hydrogen in the Indian market.

"Demand incentives may bridge this cost gap as a transitional measure. Alternatively, a 'clearing house' for green hydrogen may be introduced to facilitate demand aggregation for short-term demand consumers to provide adequate production forecasts and reliability for producers," says suggests Saurav Kumar, partner, Induslaw.

Rakesh Jha says the budget can promote green hydrogen offtakes by providing incentives or viability gap funding and infrastructure development for the entire green hydrogen value chain, including pipeline networks to facilitate offtakes.