How brightly will the sun shine when budget 2017 comes out?

However, the story for rooftop solar is not so rosy. With just 1 GW installed against a target of 40 GW from rooftop solar, it would be nothing short of a miracle to even come closer to this target unless we shake things up in a major way. And what better time to do this than on February 1, in the union budget 2017.

The energy price from large solar projects has come closer to Rs 4 per kWh and all eyes are on the module prices touching $0.30 per Wp in 2017. Solar has already achieved grid-parity for millions of energy consumers in India as the residential, commercial and industrial consumers pay anywhere between Rs 6-15 per kWh in most parts of our country. 

A number of solar specific policies like net-metering, capital subsidy for consumers as well as discoms, etc have been announced. In spite of these positives, the contribution of solar in India’s energy mix is still a meagre 1 percent only. India’s per capita energy consumption is still the lowest amongst the major developing countries and solar can play a major role in government’s Power for All objective.

We have identified four key areas where we recommend budgetary and policy intervention.

Solar loans, just like home loans

Going solar, in some parlance, is like buying a home. You will normally buy a solar system once in your lifetime and it will be there generating power for 25-30 years. It is recommended that just like home loans, solar loans are made eligible for rebate under income tax provisions. Rather than providing expensive and inefficient capital subsidies, this one provision will not just give the right message to the consumers, banks and the discoms, it will also ensure that a long term loan at cheaper interest rates is available to consumers. 

Overall, this would allow for a higher financial viability for consumers and a much lower subsidy burden on the government. The direct subsidies should be eliminated as they hinder the faster deployment of solar, more so when solar is already a financially viable investment for most consumers. 

Discoms involvement

The discoms, due to a lack of awareness, training and financial incentives, have not been very supportive of solar. That’s the trend not just in India but world over. They do not want to lose their paying customers to solar. That is also one of the reasons why Net-Metering, even though a great policy, has not been very effective in terms of implementation, in most states in India. 

We recommend that the government comes up with a direct financial package for discoms which compensates them for their losses due to allowing solar power generators to use their networks without paying for it. Of course, this incentive should be performance driven.

Lack of discom support to Open Access is another major issue hindering the growth of solar. We request that the government should mandate 100 percent open access implementation across India without any counter-competitive business practices like cross-subsidies, etc. This would also enable a better financing for solar and renewable energy projects as banks will then assess the credit rating of the consumers rather than the cash strapped discoms.

Similarly, it is time the government brought in effective controls in place to ensure that the RPO obligations are met on ground rather than just remain on paper.

Existing exemptions should continue

The Finance Minister had announced reduction of accelerated depreciation (AD) benefit to 40 percent effective April 1, 2017. We strongly recommend that the AD should continue at the prevailing rate of 80 percent for a few more years, specifically for the commercial and industrial establishments to go solar. However, we believe that the quantum of MW per establishment should be capped so as to avoid any misuse of this provision and to ensure that the smaller establishments benefit from it.

Similarly, the 10 year tax holiday to power generation companies, which is due to end in 2017, should be extended by a few more years.

The growth of solar to some extent can be attributed to the tax benefits available to the developers. There is a lot of ambiguity around GST, the much anticipated tax reform getting implemented somewhere in mid-2017. Though there is no clarity around the proposed tax structures for renewable energy industry under GST, where a high tax rate could be the biggest negative surprise from the government for the booming renewable industry. The ministry of new and renewable energy has estimated about a 15 percent increase in cost of setting up projects due to GST. 

We recommend that renewables, especially the solar sector, be kept under the ‘zero rated supply’ under the GST structure.

Use of technology

For renewables to reach the masses quickly, we need technologies that reduce the time and cost to deploy power generation assets. For rooftop and off-grid solar, the most prohibitive cost factor and longest lead time element is doing the site assessment of millions of rooftops across India. Unlike US and some other countries, India has a highly restrictive approach towards the use of drones or any kind of airborne surveillance service. The policies around the usage of these are still not quite clear and it requires multiple layers of approvals. 

We recommend that the Finance Minister in his budget makes a special provision for the usage of such technology for the solar sector under automatic route where the operators can be asked to register one time with the concerned authorities for a set period of time. This will allow accurate mapping of rooftop and off-grid installation sites across India.

Storage technology is another area which needs an immediate attention from the government and we recommend an innovation fund for storage technologies in the upcoming budget.

For India to ensure reaching 175 GW from renewables by 2022 and making power available to its almost 40 million people that still do not have access to electricity, we expect that the Finance Minister gives enough focus to the renewables sector. He already has enough expectations to handle on the overall economy. 

While we expect the headlines to be focused around relief provided to those who were hit by demonetisation the hardest as well as changes in the tax slabs, a strong focus on the renewables sector will go a very long way to fill everyone with confidence that the government is indeed serious about its push for solar. This confidence could then prove to be a key driver in India achieving or missing out the ambitious target of 100 GW by the year 2022. We just hope that there are no negative surprises coming on February 1, 2017.
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Gagan Vermani is the founder & CEO of MYSUN