As India pursues its ambitions of creating a robust green energy-backed economy, the industry and analysts have urged the government to provide tax incentives on green bonds, waive off inter-State transmission charges and a dedicated transmission corridor for hydropower in the upcoming Budget.

The industry expects government to continue its momentum to expand the clean energy sector with focus on green hydrogen, solar & wind technologies, electric vehicles (EVs), among others. Policies pushing for energy-efficient practices among companies are also expected to remain in focus.

The government’s push to the energy sector becomes critical as India’s power demand is rising significantly which coupled with an expanding economy is putting pressure on power infrastructure. The government has to tread a fine line between meeting demands of an expanding economy and at the same time leverage policies to decarbonise the industrial and transport sectors.

In such an environment, sector watchers emphasise that spending on power related infrastructure, such as setting up more thermal power plants and balancing the grid, becomes critical.

Green push

Dhanpal Jhaveri, Vice-Chairman of Everstone Group in India, said: “The current arrangement equates to a GST of 13.8 per cent on a project. By aligning it to 90:10, the effective GST rate will drop to 12.6 per cent, thereby lowering project costs. Alternatively, they can lower GST on modules back to the original 5 per cent, so even at 70:30, the rate will be 8.9 per cent. This will reduce tariffs thereby accelerating adoption of RE projects.”

Jhaveri suggested imposing import duty on solar panel cleaning robotic systems as 90 per cent of market share is with foreign manufacturers, mostly from China. Some of these companies also have unfair advantages and state support.

Deloitte India’s Partner, Industry Leader (Energy, Resources & Industrials) Ashwin Jacob recommended offering tax incentives for green bonds.

“Interest income earned by investors in green bonds may be considered tax exempt in the hands of investors. Additionally, profits earned by investors in green bonds from the sale/ transfer of such bonds may be treated as tax exempt in the hands of investors, irrespective of whether such profits/ gains are offered to tax in India by investors as business profits or capital gains,” he added.

Hydrogen purchase obligation for sectors such as refinery and fertiliser to drive domestic demand. This would provide the necessary fillip to the sector similar to the renewable purchase obligation, Jacob said.

In the compressed biogas (CBG) sector, said EverEnviro Resource Management’s MD & CEO Mahesh Girdhar a crucial step will be to secure guaranteed offtake of CBG by various natural gas-consuming industries to accelerate decarbonization.

“We believe focusing on carbon credit trading will draw more investments into CBG projects, providing much-needed cash flow. Further, a CBG Fertilizer Synchronization scheme, requiring fertilizer units to use CBG, would greatly support the industry, akin to the CBG CGD Synchronization initiative,” he added.

Infra spending

Schneider Electric MD & CEO, Zone President, Greater India, Deepak Sharma, said that continued emphasis on infrastructure development—including roads, railways, ports, and digital infrastructure—will be crucial to enhancing connectivity while also stimulating economic progress across the country.

“Additionally, we look forward to initiatives that will bolster the new energy landscape including green hydrogen, solar technologies, microgrids, and electric vehicles. We also expect the budget to introduce policies incentivizing energy-efficient practices among companies,” he added.

Everstone Group’s Jhaveri said that an extension on waiver for interstate transmission charges by 2 years from June 2025 to June 2027 along with an obligation on developers to procure a certain percentage of storage capacity will help boost the market while allowing grid to remain stable from added RE injection.

Similarly, Udit Garg, CEO & Director of Kundan Green Energy, said an often overlooked area which should be considered is dedicated transmission corridors along the lines of the Green Energy Corridor (GEC) for renewable power evacuation. This will go a long way in addressing power evacuation issues faced by hydropower developers, especially in the northeast.

Essar Oil & Gas Exploration & Production Ltd (EOGEPL) CEO Pankaj Kalra emphasised that addressing the tax structure in this sector is imperative as natural gas, crude oil, and other petroleum products remain outside the GST ambit, leading to an increasing demand for their inclusion in the GST regime.