Budget 2014: Industry Welcomes Boost to Renewable Energy

The power industry today welcomed the Budget's emphasis on renewable energy and coal-based project, saying it will give an impetus to the sector which is reeling under a crisis.

Finance Minister Arun Jaitley, in his maiden budget today, announced allocation of Rs 1,000 crore for the solar power sector.

The government has set aside Rs 500 crore for new and renewable energy, Rs 400 crore for launching a scheme for solar power-driven agricultural pump sets and water pumping stations for energising one lakh pumps, and Rs 100 crore for the development of one-MW solar parks on the banks of canals.

"The budget has attempted to address the short-term challenges for the power sector, and at the same time laid a roadmap for more comprehensive measures over the medium to long-term as well," KPMG India Partner and Head ? Energy and Natural Resources Manish Aggarwal said.

The government has also allocated Rs 100 crore for super critical ultra modern thermal power and rationalisation of coal linkages.

Mr Jaitely said measures will be initiated to provide adequate quantity of coal to power plants which are already commissioned or would be commissioned by March 2015 to unlock dead investments.

"From Rs 100 crore allocation for super critical ultra modern thermal power to the rationalisation of coal linkages (these measures) will facilitate the struggling power producers and put the stranded power plants on a rebound course," Schneider Electric India Country President and Managing Director Anil Chaudhry said.

The industry experts said the focus on the solar energy sector will give a deserving boost to solar companies to increase generation capacity which is currently a mere one per cent of the country's total energy production.

Further, the implementation of the Green Energy Corridor Project will be a great move to integrate channels for evacuation of solar power, a formidable challenge for generating companies at the moment, they said.

The existing duty structure incentivises imports rather than the domestic manufacture of solar photo-voltaic cells and modules, Mr Jaitley said in the budget speech.

The government has announced a concessional basic customs duty of 5 percent for the machinery required for setting up solar energy projects.

"The decision to emphasise the new and renewable energy by reducing the excise duty on certain solar power related products and reducing the customs duty on parts/ raw material used in the manufacture of wind-operated generators is a welcome step.

"The vision to unlock dead investments in power plants by rationalising the coal linkages and to develop solar park on banks of canal indicates the government is heading in the right direction," EY India Tax Partner-Infrastructure Practice Samir Kanabar said.

Mr Jaitley has also proposed extending the 10 year tax holiday to the undertakings which begin generation, distribution and transmission of power by March 31, 2017, instead of annual extensions.

"The government's decision to end the impasse on coal supplies to power plants and ensure availability of the fuel to all projects that are commissioned before March 2015, is a welcome move. Power reforms including Rs 200 crore fund allocation in addition to extension of 10-year tax holiday and encouragement to banks for giving long-term funds and loans to the infrastructure sector is bound to give a boost to the ailing sector," Hindustan Power projects Chairman Ratul Puri said.

The government has also decided to introduce Deen Dayal Upadhyaya Gram Jyoti Yojana for feeder separation to augment power supply to the rural areas and for strengthening sub-transmission and distribution systems. A sum of Rs 500 crore would be allocated for this.

"The allocation of Rs 500 crore for Deen Dayal Upadhyaya rural electrification programme clearly indicates government's inclination towards strengthening infrastructure development," Mr Puri added.