After the year that we had, there were high hopes for the Union budget for 2021-22. The renewable energy industry in general, and the solar industry in particular, had different expectations – from finding support to recovering from the aftermath of the pandemic-triggered lockdown.
Incentives for the introduction of solar energy, the promotion of research and development in the field of hardware and infrastructure, and many other areas were closely monitored.
And the 2021 budget did not miss the expectations of this sector. The allocation of additional funds to the Solar Energy Corporation of India (SECI) and the Indian Renewable Energy Development Agency Limited (IREDA), as well as the additional allocation of around 3.5 billion rupees to support troubled distribution companies (Discoms), were seen as great strides.
With the clear intention of offering consumers alternatives, the Finance Minister expressed the need for a framework for the establishment of more public and private discoms. In support of the Atmanirbhar Bharat Initiative, it also announced an increase in the import duty for solar inverters and solar lanterns from the current 5 percent to 20 percent and 15 percent respectively.
Important conclusions from the budget announcement are:
1. The allocation of funds to SECI and IREDA would address the central challenge of the availability of funds for the construction of solar systems. The key, however, is to develop clear guidelines for using these funds.
For example, the decision by the Ministry of New and Renewable Energies (MNRE) last year to channel subsidies for solar roofs through state discoms was not welcomed by the association of solar manufacturers due to the conflict of interests with discoms in promoting solar energy.
2. The industry is also looking forward to supporting research and development in solar module and inverter technology. SECI and IREDA should fund such initiatives on a large scale that could lead to the ultimate transition from imported options to local hardware of the highest quality.
3. Likewise, the allocation of funds to support DISCOMs should be complemented by end-user standards and stricter rules for revising the existing infrastructure.
4. Privatization is also a welcome step and competition would help to improve the infrastructure for electricity generation and transmission by leaps and bounds. This in turn would require inexpensive electricity and thus increase the demand for solar parks.
5. Other announcements such as lowering compliance standards for small businesses would help solar startups. Increased adoption of electric vehicles would also complement the need for green energy.
6. The increase in tariffs on imported solar inverters and lanterns is positive for the Make in India mission.
However, it is not enough just to dissuade customers from buying imported hardware, it is equally important to build manufacturing capacity at home and promote Indian inverters and lanterns organically. There was nothing in the budget that addressed this key aspect of the indigenization of solar hardware.
It’s also worth noting that India has only achieved 37% of its target installed capacity of 100 GW by 2022. Of this, the solar capacity on the roof, especially on the roof of residential buildings, is negligible. The budget should have focused more on overcoming the challenges in the roof area.
In large-scale projects, measures to encourage investor incentives and to establish the accountability of defaulting customers (in the case of electricity purchase agreements) are the order of the day.
In summary, while the budget has announced the injection of funds for the solar and electricity sectors, some more targeted measures would have worked better. If implemented effectively, the Indian solar market will benefit in the long term from the measures announced this year.
YourStory’s multimedia coverage of Budget 2021 can be found on YourStory’s Budget 2021 page or at budget.yourstory.com.
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)