Budget 2019: Need for long-term consistent policies in RE sector

Budget 2019: Need for long-term consistent policies in RE sector

India stands fourth in the world when it comes to the attractiveness of the renewable energy sector and fifth in terms of total installed capacity. Today, the Indian solar industry has emerged as one of the world’s largest markets for solar photovoltaic, providing ample growth opportunities. To further propel the growth of the Industry, there is a need for certainty and long-term consistent policies.

The year 2018 did present a few challenges, first being the uncertainty around safeguard duty with the imposition of 25 per cent duty on the import of solar panels. On the other hand, the order issued by the Central Electricity Regulatory Commission approving the goods and services tax (GST) claims for a uniform 5 per cent raised by solar power developers was a welcome move as it provides clarity. Although, we feel that the 70:30 mix is on the higher side for the services component and 10 per cent to 12 per cent range should be the rational, which will bring the effective GST rate to 6.8-7.0 per cent from the current 8.9 per cent. Additionally, we hope that in this Budget the government continues to focus on reducing the corporate tax rate to help the country move towards a lower tax regime.

Since the government has an ambitious target of 175 gigawatt (GW) by 2022, and renewable energy being a capital intensive business, availability of long-term capital pool dedicated for the sector is important for its sustained growth. We urge that specific measures are adopted in the 2019 Budget for availability of long-term credit at favourable terms. This can be implemented with multiple options including earmarking funds for these projects in the banking system or have dedicated financial institutions/banks to provide lending to renewable industry and social infrastructure projects. Additionally, if the government along with the Reserve Bank of India can bring renewable energy projects under priority sector lending without any limit — currently solar rooftop projects are under priority sector lending category, however, it is restricted to Rs 15 crore per year — it would give a much-needed boost to the sector.

Attracting pool of capital from high networth individuals (HNIs)/retail investors is another opportunity which the government should explore for renewable energy and other social infrastructure projects. As an HNI/retail investor is unlikely to own and operate a solar business, the best way is to make such renewable energy projects an ‘Investment Product’ and not an asset to be owned, thereby allow pass through of tax incentives such as depreciation to make it tax efficient investment for HNI/Retail investors. There is an opportunity in this year’s Budget, for the government to announce a broad framework like real estate investment trusts for renewable industry since there is a need to introduce a secondary market for the industry to attract investments.[ETENERGY World]

tamperfinder