The cuts in import taxes in the Budget for renewable energy equipment might not suffice to increase the competitiveness of domestic manufacturing, industry players feel. Strengthening of the renewable purchase obligation on the state power distribution companies and a mechanism to ensure timely payment by the discoms would have helped, they say.
While Tulsi Tanti, the chairman and managing director of Suzlon Group, attributed the tax reliefs as “a much needed progressive moves”, he added that the renewable industry was hopeful of the Budget enabling the domestic industry to face import competition. Anil Sardana, managing director of Tata Power, said that the strengthening the renewable purchase obligations mechanism is essential and should be part of the government’s larger vision for renewable energy.
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To expand the scope of solar energy, finance minister Arun Jaitley proposed to feed about 7,000 railway stations with solar power and add 20 GW of solar energy capacity with the proposal to initiate the second phase of solar park development. Apart from any provisions for RPO, this year’s Budget did not address other issues such as grade slippages in coal supplies, timely payment by distribution companies (discoms) and easier land availability, which have been concerning the power industry for quite some time. While Amarthaluru Subba Rao, executive director, finance and strategy, of CLP India, said that the industry is yet to experience the positive effect effect of the UDAY scheme in accelerated receipt of the over dues from discoms, he wished that the Budget had extended generation-based incentive (GBI) scheme for wind energy.
The cut in income tax rates, one of the takeaways of the Budget, might bear fruit for the renewable energy sector, experts believe. Kameswara Rao, partner at PricewaterhouseCoopers, said that through income tax cuts, smaller power projects, typically under 50-MW renewable energy projects, might add about R0.30-0.50 per kWh in improved net margins.
But the Budget did not mention anything about thermal power, which is presently struggling with dwindling plant load factors. In its economic survey for 2016-17, the finance ministry had admitted that private power producers in India are likely to remain mired in the unfriendly commercial scenario, as there is scant sign that PLF and tariffs might improve.