Budget 2020: How new measure will improve offtake of renewable energy sector

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Updated: Feb 02, 2020 12:19 AM

Budget 2020-21: The smart meter programme and proposed distribution reforms would aid discoms in curtailing their distribution losses, besides benefiting retail consumers by giving them flexibility of choice of power suppliers.

Budget 2020 India, Budget 2020-21Budget 2020 India: Equity support for IFCs, which would enable them to increase long-term project debt funding, as well as the large NIP allocations, augurs well for investment in the power sector.

Budget 2020-21: The proposed measures on solar energy are likely to improve the offtake of renewable energy (RE) as well as reduce the subsidy dependence of discoms. On the negative side, higher captive renewable energy offtake by the railways will cause the loss of a high-quality remunerative customer base to discoms.

The smart meter programme and proposed distribution reforms would aid discoms in curtailing their distribution losses, besides benefiting retail consumers by giving them flexibility of choice of power suppliers. Shutting down of old power plants is likely to shift generation to newer, currently under-utilised thermal power plants as well as RE capacities; this will provide a moderate boost to the PLFs of the aforesaid new thermal units. The fiscal measures are likely to boost fresh capital investments, especially by overseas equity investors in the domestic power sector, including RE and transmission. Lower taxes will also enable newer generation companies to offer lower tariffs, bringing down costs for the off-taking utilities.

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Equity support for IFCs, which would enable them to increase long-term project debt funding, as well as the large NIP allocations, augurs well for investment in the power sector.

Overall, while the Budget is a positive for the power sector, the realisation of its promises would be dependent on the on-ground progress in achieving distribution sector viability and the resolution of various structural issues affecting thermal green-field projects.

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