Budget 2018: Why Renewable Sector Needs Innovative Financing

While most of the issues could be addressed with non-budgetary action, it would be sane for the budget 2018 to respond to these issues and to facilitate the smooth process of clean energy targets.

The 2018 budget to be presented on 1 February will be the last full-year budget of this government. This budget comes with huge expectations as Narendra Modi wants to capitulate the nerve of common people before the country goes to polls in 2019. As far as the renewable sector is concerned, it remains to be seen what will be the government’s continued commitment towards clean energy.

Let’s go through the renewable targets once again made by the Government of India and how much they have been able to fulfill targets so far. As of December 2017, India’s renewable energy capacity stands close to 62 GW. Wind energy leads in the installed capacity with 33 GW followed by 17.05 GW of solar, 4.4 GW of small hydro, and 8 GW of bio-power. It clearly indicates the ambitious target of 175 GW renewable energy capacity for 2022 is still short and needs more attention.

Will the government come up with effective policies in the renewable sector such as support domestic manufacturing, and skill the workforce? Or will the sector merely rely on wishful thinking?

There’s no doubt government is trying their level best to come to its expectations, however, more needs to be done to resolve the confronting issues. Lack of policy clarity, regulatory hurdles and the decrease in the commissioning of projects clearly indicates renewable energy sector is mired in uncertainties. While most of the issues could be addressed with non-budgetary action, it would be sane for the budget 2018 to respond to these issues and to facilitate the smooth process of clean energy targets.

The temporary safeguard duty or a long-term anti-dumping duty on imported solar modules is troubling the industry. The three countries mainly China, Taiwan and Malaysia currently manufacture 90 percent of the solar modules used in Indian projects. The domestic solar manufacturing capacity in India is too small and inadequate to meet the growing demand from developers.

This is why solar manufacturing sector has long argued for budgetary and policy support. This time, they will also see this budget as a watershed moment for the government to walk the talk on its “Make In India” programme.

On the other hand, the new proposal to impose a 70 percent safeguard duty if implemented, on imported solar products will raise the cost of solar power for developers. This, in turn, will lower the competitiveness of solar electricity and could impact viability of under-construction solar projects and spoil the investment climate in the sector, scaring investors away.

This is why a more strategic manufacturing policy is needed. For long-term benefits, new and innovative means are needed to build new markets for visionary targets. Also, for large-scale projects, policies in the solar rooftop and electric mobility sectors have become increasingly important.

Thus the government must focus to explore ways to use the public money most effectively in the budget 2018 announcement. There is an immense need to lower the cost of finance and increase the flow of private capital that will help self-sustaining markets in renewable energy and its affiliated sectors.

When it comes to national priorities like energy access, job creation, energy security and increased domestic manufacturing as well as to display international climate leadership, India must show the renewable energy sector some budgetary money.