The Interim Budget 2024-25 gave a small but meaningful push for the green energy sector with the announcement of the PM-Surya Ghar Muft Bijli Yojana. Experts say they are hoping the Union Budget will give more consideration for the green industry.
Ajay Shankar, Distinguished Fellow, The Energy and Resources Institute (TERI), cited the Prime Minister’s announcement in Glasgow at COP26 that India would have 500GW of fossil fuel-free energy generation capacity by 2030. “Most of this capacity has to come from renewables, and renewables now need storage. An announcement of a steep rise in annual capacity addition of renewables along with storage and ensuring provision of necessary green finance for this purpose would send the right signals,” h ..
This will help to address the challenge of integrating intermittent renewable energy sources into the grid.
Apart from this, he pointed out that the budget should also make an announcement that India will become self-reliant in the production of solar panels and green hydrogen in five years. That would indicate the government's seriousness in achieving a breakthrough in the make in India initiative. Import duties and financial support should be fine-tuned to achieve this and a road map to achieve self-reliance should be announced.
Another important step that can create an enabling environment for the green energy sector would be policy stability. Gautam Mohanka, CEO, Gautam Solar, said that for investors and project developers, policy stability has always been crucial. “As solar projects require huge investments and can take 2 or more years, investors need the confidence that there will not be any sudden policy shifts. Hence, policy stability and development of grid infrastructure are key areas for investors and developer ..
One of the biggest challenges in the solar industry remains the negligible production of solar cells and wafers in the country. A PLI scheme that provides capital subsidy support to mid-sized manufacturers of solar cells and wafers will help in establishing the entire supply chain of solar module manufacturing in the country. Mohanka said that Indian manufacturers still heavily rely on Chinese suppliers for these raw materials.
In fact, while the annual solar panel manufacturing capacity in the country was 64.5 GW by the end of 2023, the capacity of solar cell manufacturing was limited to 5.8 GW.
“The major reason for this is the complex and capital intensive process. Indian manufacturers already face financing hurdles, paying 3 to 4 times higher interest rates than their Chinese counterparts. In recent times, a small number of large conglomerates have been able to start this manufacturing through the PLI scheme. So, the government can take out a PLI scheme for mid-sized manufacturers so that there are no monopoly concerns, especially as many projects now require panels meeting DCR requi ..
He acknowledged that there has been some concern around import duty on solar components. The import duty on solar modules has been set at 40% and that for solar cells at 25%. “The government can consider cutting down the import duty on solar cells from 25% to maybe 15% till the indigenous solar cell production capacity grows to meet the requirements. This will reduce the cost overheads for domestic manufacturers, helping Indian solar panels to be more cost-competitive with Chinese panels,” he sa ..
Adding to this, Manish Dabkara, Chairman & MD of EKI Energy Services Ltd, said the high import duties act as a double-edged sword for the industry. Increased costs for imported solar modules and cells have slowed down renewable energy adoption due to less project viability. On the other hand, domestic manufacturing capacity isn't yet sufficient to meet the demand, leading to project delays. The transition should be gradual, he said.
He explained that a phased reduction of import duties could provide time for domestic manufacturers to become more competitive. “Focusing on PLIs and other benefits for domestic manufacturers can encourage local production, ultimately reducing reliance on imports and fostering a more sustainable renewable energy industry. The upcoming budget should bring catalysts to phased reduction in import duties over a set timeframe, would provide immediate relief to project developers and allow domestic ma ..
The government can promote long-term domestic capacity building without solely relying on import duty manipulation. The ideal approach should strike a balance between project cost competitiveness, domestic manufacturing incentives and technological advancement, he said.
Among other expectations, Dabkara said that the industry wants innovative financing solutions to bridge the gap between project costs and tariffs. This could involve green bonds, infrastructure investment trusts or easier ..
Source Name : Economic Times