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Energy sector seeks tax incentives for solar, PLI scheme expansion, and more from Union Budget 2023

In Budget 2023, government’s focus on the energy sector is keenly eyed, considering the set targets in green energy, which is expected to play an important role in India’s economic growth

Energy sector seeks tax incentives for solar, PLI scheme expansion, and more from Union Budget 2023
In Union Budget 2023, government may take actions around climate financing and mobilising more resources by increasing allocation in the PLI scheme for boosting the domestic manufacturing of green and sustainable solutions.

Budget 2023, scheduled to be presented on 1 February, is expected to propel India into the future as an economic and green powerhouse. Among other sectors such as infrastructure, the government’s focus on the energy sector is keenly eyed, considering the set targets in green energy, which is expected to play an important role in India’s economic growth. The government is committed to reducing India’s total projected carbon emission by 1 billion tonnes by the end of the decade. It aims at reducing the carbon intensity of the nation’s economy by less than 45% by 2030, and also achieve net-zero carbon emissions by 2070. Industry leaders of clean energy are expecting some positive announcements in the upcoming budget.

What energy sector expects from Budget 2023

  • Measures to promote the use of renewable energy, such as tax incentives for solar and wind power projects.
  • Increase in allocation for research and development in the energy sector, to develop new technologies and products.
  • Measures to improve the overall affordability of energy for consumers, such as reducing import tariffs on energy-related products.
  • Measures to support the development of infrastructure, such as investment in transmission and distribution projects.
  • Measures to improve the overall efficiency of the energy sector, such as increasing the use of smart grid technology.
  • Measures to promote the growth of energy-related industries, such as tax incentives for energy companies.
  • Measures to support the overall growth of the economy, which will ultimately benefit the energy sector.

PLI in ammonia sector expected in Union Budget

India is the world’s second-largest importer of ammonia – the cornerstone of energy transition and food security. Several ammonia plants are much older than the global average of 12 years, resulting in accumulative production inefficiencies. “Add our ambition to evolve as a hydrogen economy to the mix (where ammonia is deemed to be the most suitable carrier) and you realise that India’s ammonia capacity needs to be ramped up significantly. This includes greenfield plants and also complete overhauling of older ammonia plants with the latest production technology,” said Raghunath K, Country Representative, thyssenkrupp India.

He added that improved domestic access to ammonia will provide the economy with two major benefits: energy security for a hydrogen economy and food security, as majority of ammonia is converted to urea and fertilizer, which too are partially imported at the moment. “On green molecules side, while an electrolyzer PLI can now be expected, further to the union cabinet approval of funds, the long-awaited chemicals and fertilizer PLI, when announced, will make sense only when this production capacity bottleneck is removed. A comprehensive policy for scrappage of old plants or PLI in ammonia sector can breathe life into both food and energy security in parallel,” Ragunath said.

PLI scheme to boost domestic manufacturing of green, sustainable solutions in Budget 2023

Some of the key policy interventions required towards fulfilling the vision of transforming India into a gas-based economy also include bringing natural gas under the ambit of Goods and Services Tax (GST). The government is already taking several steps to ensure that the country move towards sustainable energy security and progress. As the country fights climate change with clean energy, it is expected that in the upcoming budget, the government may take actions around climate financing and mobilising more resources by increasing allocation in the Production Linked Incentive (PLI) scheme for boosting the domestic manufacturing of green and sustainable solutions.

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First published on: 25-01-2023 at 14:11 IST