Budget Reactions- Industry Hopes Green Credit, Transmission Focus And More Will Deliver

Budget 2023-2024, lacking any big ticket announcements save the focus on green growth has been welcomed guardedly by industry. Plaudits have come from the EV sector, where the exemptions granted for Lithium Ion battery manufacturing have been welcomed. However, solar developers have been left hoping that the focus on transmission will strengthen the grid, helping them indirectly, as much hoped for announcements like exemption on imports did not materialise, Storage has been given an impetus, with the promise of Viability Gap Funding for upto 4 GWh winning favour from relevant players. However, it has to be said that leaders have had to make an effort to highlight the positives.

Ishan Chaturvedi

Ishan Chaturvedi, Director & Co-founder, Vareyn Solar

Ishan Chaturvedi, Co-Founder, and Director of Vareyn Solar, begins by making a mention of Ladakh being aided with funds worth Rs 20,700 crore for renewable energy, “The Union budget has really identified the need for green growth and will be beneficial in the growth of the renewable energy sector. Ladakh is the best place to have solar installed in entire India as locations with low temperatures support higher solar generation and the sunlight irradiance intensity is near to that of Rajasthan. So, we welcome the green plan for Ladakh,” Last year, it was announced that PGCIL will be establishing the marquee project that will transmit 10 GW of renewable energy capacity being set up in Ladakh. Project finance, which has been a worry for industry for long has also been addressed in the Budget. He continues, “Acquisition Financing for foreign banks’ Indian Units will increase influx of money to India. With the increase in Green Assets and Investments, A&M(Acquisitions & Mergers) can get a push with the increased finance competition.”

Rajat Verma, Founder at Lohum Cleantech

Rajat Verma, Founder at Lohum Cleantech

Among the announcements, the one on the impetus to the Battery Energy Storage Systems (BESS)  of 4000 MWh via viability gap funding has left the industry feeling upbeat as this will pave the way for setting up projects on solar with storage on mega-scale. This is said to also be an enabler for public-private partnerships.

Rajat Verma, CEO & Founder, Lohum Cleantech terms the Budget “progressive”, while adding further that “Viability Gap Funding for BESS will certainly make renewable energy storage a reality.”

V G Anil, Head of Operations, ARENQ

V G Anil, Head of Operations, ARENQ

“We welcome the government’s decision to allocate Rs 35,000 Cr for energy transition, & viability gap funding for battery storage. The steps will enable growth in renewable energy capacity additions & grid stability. Viability gap funding for a battery storage capacity of 4000 MWh can bring about a capex of around Rs 15,000 Cr leading to lower tariffs for storage-linked project bids,” V G Anil, Head of Operations, ARENQ expresses his optimism. While VGF for storage is touted as a major step, everyone continues to wait in anticipation for FM’s announcement for the formulation of a detailed framework for pumped storage projects, which will only help give an additional push to storage, which has been a laggard.

Ankit Mittal, Co-Founder & CEO, Sheru

Ankit Mittal, Co-Founder & CEO, Sheru

“While clean energy has been rising rapidly in recent years, lack of storage and outdated transmission infrastructure has been slowing its growth. The budget addresses these through a large CAPEX allocation for modernising and strengthening the green power infrastructure. In addition to this, there is also viability gap funding for battery storage and 35,000 crores allocated towards green energy transition,” says Ankit Mittal, CEO, Sheru.

The removal of customs duty for machinery required for manufacture of lithium ion batteries and cells used in electric vehicles will extend only to EVs made domestically in India. The makers are happy because it brings down the manufacturing costs for them considerably.

Varun Goenka, CEO & Co-Founder, Chargeup

Varun Goenka, CEO & Co-Founder, Chargeup

For Varun Goenka, CEO & Co-Founder, Chargeup, this is among the “most impactful decisions” of the Budget this time. He states, “The extension of customs duty exemption for import of capital goods and machinery required to produce lithium-ion batteries for EVs in India will reduce the initial capital investment needs for the battery manufacturers and is also likely to make the batteries become cheaper as there will be a larger manufacturing base for them. Concession on duty on lithium ion cells import for EV batteries has also been extended for another year, which would lead to greater EV adoption in 2023. Similarly, basic customs duty exemption on raw materials required for manufacturing of nickel cathode used in the batteries has also been continued.”

Ankit Kedia, Founder & Lead Investor, Capital A, also voices his support for this initiative, “Custom duty exemption on the import of lithium-ion batteries will continue to focus on the transition to electric mobility. Overall this Budget will help India achieve its commitment to a low-carbon economy while achieving economic growth at the same time. It is expected that these initiatives will help create employment opportunities as well as attract foreign investment into India’s economy.”

Mittal further sheds light on the implications of this for the EV sector, ““For clean energy and e-mobility, Budget 2023 has several benefits that carry forward the momentum. Electric vehicles need further cost declines in battery and electronics to increase consumer uptake. The custom duty reduction on the import of capital goods and machinery for li-ion battery manufacturing and subsidy on the import of lithium-ion cells being extended by another year will ensure that this cost decline continues.’

“Support for viability gap funding for battery storage solutions with a capacity of 4,000 MWh and a reduction in customs duty on lithium-ion batteries for one more year will bring us close to a net-zero carbon emission goal by 2070,” Nitin Kapoor, Managing Director of Saera Electric Auto Private Limited, echoes the hope of many EV manufacturers.

Other than the VGF funding in storage and the exemption of duty on Li-ion cells, The announcement on ‘Special Assistance to States for Capital Investment’ with an outlay of Rs 1.07 lakh crore, previously, Rs 1.05 lakh crore, has also been applauded. Under this, incentives will be provided to encourage the scrapping of old vehicles (older than 15 years). Tax concessions will also be provided to those who opt for it. States will get an additional Rs 2,000 cr under Special Assistance for Capital Investment Scheme. The Scheme paves the way for the provision of financial assistance to State Governments via 50-year interest free loans for projects on capital investment. the government has given a nod for Rs 77,110 crore under the scheme.

Tushar Choudhary, Founder & CEO, Motovolt Mobility

Tushar Choudhary, Founder & CEO, Motovolt Mobility

Of this, Rs 41,118 crore has been disbursed to states. Not unexpectedly, EV makers are of the view that this will accelerate the adoption of electric vehicles, which, otherwise has been seeing reservations from potential buyers, “The scheme announced to scrap old vehicles and replace the old polluting vehicles will encourage more people to switch over from petrol/diesel cars to electric ones. The Indian Government is committed towards introducing green mobility solutions such as e-rickshaws, e-bicycles and other clean energy transport systems in cities across the country with an emphasis on green growth with focus on green fuel. We are delighted to see such initiatives included in the Union Budget 2023,” Tushar Choudhary, Founder & CEO, Motovolt Mobility.

Nitin Kapoor, Managing Director of Saera Electric Auto

Nitin Kapoor, Managing Director of Saera Electric Auto

Nitin Kapoor seconds Choudhary’s view, “The scheme announced to scrap old vehicles and replace them with better ones, most positively with EVs, is a welcomed decision. The intention to encourage a zero-carbon strategy in the auto sector for the long term came out loud and clear in the budget. It will help OEMs to push for greener mobility solutions in the country and could facilitate the auto industry’s transition to cleaner mobility.”

Energy transition and the green mobility stand to gain massively from these initiatives. Speaking of energy transition, the National Green Hydrogen Mission has also received further impetus with Rs 15,000 crore. The Mission is said to aid the transition of the economy to low carbon intensity while also curbing country’s dependence on imports of fossil fuel. The goal for the Hydrogen Mission has been pegged at 5 MMT of annual production by 2030. As may be recalled, there is an allocation of Rs 19,700 crore allocation for Hydrogen as part of Mission. Vehicles powered by hydrogen fuel cells may soon become a reality with this directive. The Government has made its stance on energy transition amply clear by earmarking Rs 35,000 crore as priority capital investment aimed at energy transition.

“Union Budget 2023 focuses on continuing the momentum towards a sustainable India. By earmarking green growth as one of the 7 key priorities, the Government has reaffirmed its commitment to decarbonization and creation of green jobs. The allocation of Rs. 35,000 Cr. for priority capital investment towards energy transition will help catalyze our Net Zero journey. Viability Gap Funding for battery storage projects, significant outlay for grid expansion for Renewable energy and the green credit programme to incentivize sustainable behavior are all very welcome and timely steps that will accelerate clean energy adoption. The PM PRANAM scheme will boost the usage of green ammonia for production of environment friendly fertilizers. The policy for scrapping old vehicles and customs duty exemption on Li-ion batteries will also help fast track EVs and clean up the mobility sector,” Rahul Munjal, Chairman & Managing Director, Hero Future Energies shares.

Raman Bhatia, Founder & Managing Director, Servotech Power Systems Ltd

Raman Bhatia, Founder & Managing Director, Servotech Power Systems Ltd

Raman Bhatia, Founder and Managing Director, Servotech Power Systems Limited, showers praises on the Budgetary outlays in the renewable and EV sectors, “The Budget 2023 has put a reinstated focus on Green Growth. With the FM allocating Rs 35,000 crore towards this sector, prioritising India’s net zero goals and energy transition, this presents players in this space a unique opportunity to make clean energy solutions like solar and EV charging both accessible and affordable for the people, unlocking mass consumerization. This extensive budgetary allocation for the sector coupled with additional production linked incentives for manufacturing high-efficiency solar photovoltaic modules, will lead to significant advances in the country’s decarbonization initiatives.”

Right at the outset, FM Nirmala Sitharaman had established her commitment. As per a report dated 2022, in southeast asia, India has recorded the second-highest growth rate in green jobs, after Malaysia. A survey by a hiring platform has also said that Sustainability Managers are highly in demand in the country.

The Budget will further encourage green jobs, Varun Goenka supports this, “The establishment of 100 National Skill Development Centers will ensure that a larger number of youth across India are trained on advanced technologies and made ready to work in the climate-tech sector.” He concludes with his views on clean mobility and why he establishes that India, complemented by growth in green jobs, will also be a lucrative destination when it comes ease of doing business, “Improving the ease of doing business by reducing 39,000 compliances, All these are great initiatives, and if this momentum is further supported by the unveiling of the final draft for the Battery Swapping Policy, we will be able to witness accelerated growth of clean mobility in India.” The Economic Survey 2022-23, only validates this. It points out that India is becoming a favoured destination for investment in renewables.” The Renewables 2022 Global Status Report, during the period 2014 -2021, only validates this further as it notes that the cumulative investment in renewables was US$ 78.1 bn. Every year, India has been close to the (or higher than) US$ 10 billion mark of investments since 2016. The exception to this was 2020 because of the pandemic.

Ketan Mehta, CEO and Founder of HOP Electric Mobility, says “A largely all-encompassing inclusive budget offers something to cheer about for all sectors; emphasis on rural development – where resides the real BHARAT, and Green sustainable climate consciousness is growth focused for a bright future. The Budget will drive economic growth, create jobs and attract investments. Pushing investments in sectors such as agriculture, fishery and cattle, and supporting procurement of components for electric vehicles, and focus on clean energy and fuels like Hydrogen will significantly enhance the prospects of segments that were in need of attention.”

The EV industry largely agrees with the Green Credit program too. As Sakshi Vij, Founder and CEO of Myles Cars, puts it, while also placing an emphasis on EV financing, which could certainly do with some initiatives in this space, “The Budget presented is positive and growth focussed. The focus on Green Energy adoption through the Green Credit programme will be a welcome move. If this program is able to assist EV financing, we see this as being a significant boost to accessibility in Electric vehicles for a variety of mobility solutions. The increase in Capex budgets by 33% along with Rs. 35000 crore proposal for Energy transition are both welcome steps for the mobility space enabling greater scope for innovation and growth.”

Tushar Choudhary adds to Vij’s and Mehta’s views, “The government has granted infrastructure status to the EV sector, paving the way for easier access to credit for companies making EV components. This will reduce production costs and help expand India’s manufacturing capabilities in this sector.”

“This Budget will be used to encourage investments in renewable energy sources, reduce carbon emissions, and increase energy efficiency. One of the key aspects of this is the launch of a Rs 2,200 crore Aatmanirbhar clean plan program. This is a clear indication of the government’s commitment to reducing India’s estimated total carbon emissions by 1 billion tonnes by the end of the decade. The government’s aspirations to achieve net-zero carbon emissions by 2070 and reduce the country’s carbon intensity by 45% by 2030 are also significant steps in this direction. The government plans to develop an integrated sustainable development system that includes measures such as electric vehicles, waste management systems, water conservation projects, and solar power plants. Furthermore, the budget also promises increased funding for research and development of clean technology solutions including green hydrogen production facilities. The government’s decision to exempt excise duty on GST-paid compressed biogas containment will give a boost to the green mobility sector. Also, custom duty exemption on the import of lithium-ion batteries will continue to focus on the transition to electric mobility. Overall this Budget will help India achieve its commitment to a low-carbon economy while achieving economic growth at the same time. It is expected that these initiatives will help create employment opportunities as well as attract foreign investment into India’s economy,” Ankit Kedia, Founder & Lead Investor, Capital A, provides an apt summary of the Budget, which most will agree with.

While one can predominantly sense assent from renewable and EV industry, there is an important area which the Budget has left unaddressed. For long, the PLI and ALMM have been believed to be non-inclusive. At the same time, the basic custom duty on imports of solar cells and modules has led to discontent among manufacturers. There were high hopes from manufacturers that the Budget this time would make ALMM and PLI more inclusive while providing relaxations on the duties for domestic manufacturers. Rahul Munjal, whose views are likely to strike a chord with most, talks about this, “While all the above announcements are very good and desirable, we would also like to see some additional measures such as extending PLI scheme to manufacturing of wind turbines and electrolyzers, reducing GST on sale of renewable energy components and O&M costs, enabling low-cost project financing, deferring BCD on solar modules and cells till the domestic manufacturing ecosystem matures and establishing a stronger mechanism for monetizing carbon credits. I would also like more clarity on how the Govt. plans to achieve the target of producing 5 MMT of Green Hydrogen by 2030, especially on matters such as green hydrogen consumption mandates and its transport and storage options, among others.”

Manjesh Nayak, Co-Founder & CFO, Oorjan Cleantech, agrees, “There were no striking announcements made to support the solar sector specifically. The sector has been negatively impacted by ALMM and the imposition of BCD. There were expectations around the reduction of BCD and GST rates on solar and measures to ease financing for rooftop solar adopters. The Budget has left these issues unaddressed.”

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