Power sector Budget wish list: Funds for green energy, more domestic mfg

Sector executives are expecting a relook of GST rates across the renewable energy supply chain, and viability gap funding for newer sectors

With India accelerating green energy transition, the energy sector is pinning its hopes on the upcoming Union Budget to catalyse policy support and tax benefits. Sector executives are expecting a relook at GST rates across the renewable energy supply chain, and viability gap funding for newer sectors such as green hydrogen, offshore wind and energy storage, among others.

Global CEO of Hero Future Energies Srivatsan Iyer said the green energy industry is looking for reduction of GST rates on renewable energy components.

“Lowering GST on solar modules, wind turbines and electrolysers from the current rates to 5 per cent would significantly reduce project costs and thereby cut cost of renewable power and hydrogen to consumers across India,” Iyer said, adding that reducing or eliminating customs duties as well on imported solar cells and modules would enhance the economic feasibility of solar projects and projects involving green hydrogen.

Resonating the same hopes, AMPIN Energy Transition CFO SK Gupta said the government should also consider removing the mandate on procuring Approved List of Models and Manufacturers (ALMM)-approved solar modules requirement, especially for the commercial and industrial segment. He said as the capacity of the ALMM list of companies is lower and there is no direct subsidy, the government should relax this mandate. ALMM has only domestic players.

Gupta, however, also added that the Budget should encourage key equipment manufacturing for module and cell manufacturing in India itself through promoting suitable policy, regulatory, financial and tax regimes for the same. “India has a strong history of in-house equipment manufacturing, yet our reliance on RE manufacturing machinery and equipment is almost 100%. In the next phase, this reliance should be reduced to zero,” he said.

In recent years, newer clean energy sectors have emerged, which include fuels such as green hydrogen, plant-based biofuels and energy storage, among others. Energy sector experts point out that initial subsidy support and tax relaxation on import of crucial raw materials would help the indigenous industry grow rapidly.

Iyer said the industry is hopeful of the Budget to support growth of green hydrogen and battery storage through viability gap funding and subsidies. “Support is essential for making hydrogen competitive with other alternatives and fostering development of a robust battery storage market,” he said.

Raju Kumar, partner and energy tax leader, EY India, said the green hydrogen mission launched in 2021 would require policy support to address infrastructure, storage and transportation-related challenges. “On the GST front, important areas to consider would be reduction in tax on hydrogen to foster greater adoption and inclusion of natural gas within the GST framework,” Kumar said.

Earlier this year, the Centre announced a new scheme for promoting rooftop solar. While Rs 75,000 crore of central funding has been allocated for the programme, Kumar is of the view that for rapid rooftop solarisation, power distribution companies “may receive financial thrust to develop a country-wide infrastructure for transmission and metering”.