Economy

Why the Budget lacks chlorophyll

M Ramesh Chennai | Updated on February 02, 2020 Published on February 02, 2020

How green is the Budget? Not very, judging by the feedback from industry and experts.

The renewable energy industry is clearly disappointed with the Budget, even though the Finance Minister used the word ‘solar’ 11 times in her speech.

The industry feels the Budget does not addresss the underlying issues that have been hurting the industry.

Most of the references in the Budget are in the context of solar agricultural pumps, but it has little for large-scale solar (or wind) power plants. True, the Finance Minister has announced a scheme to help farmers put up solar power plants on fallow or barren lands they own, and another scheme for the Railways to put up solar plants alongside rail tracks, but renewable energy independent power producers have little to cheer.

‘Very disappointed’

Sunil Jain, Executive Director and CEO of Hero Future Energies, one of the country’s leading wind and solar energy companies, says he is “very disappointed” with the Budget. Jain told Business Line that he had been hoping to hear something concrete about a plan that the Ministry of Finance had earlier mentioned to create an institutional infrastructure to honour contracts.

This was announced in the wake of the Andhra Pradesh government trying to re-negotiate signed-and-sealed agreements.

Further, the biggest problem that renewable energy companies face is the non-payment of dues from the various state-owned electricity distribution companies.

Jain welcomed the move to reduce corporate tax on electricity generation companies to 15 per cent, but noted that these will only be applicable prospectively.

The Indian renewable energy sector has seen large participation from foreign sovereign wealth funds, such as those of Singapore and Abu Dhabi. So, would the proposed 100 per cent tax exemption on the “interest, dividend and capital gains” on investments made in India’s infrastructure make the country’s wind and solar projects more attractive?

The industry’s response to this has been two-fold. First, there has to be a profit for a tax exemption to kick in. Second, why give this benefit only to foreign sovereign wealth funds; why not Indian private equity funds, too?

Overall, the renewable energy sector feels rather ignored.

Climate action

This is the first Budget speech that mentions climate change.

The Finance Minister spoke of the need to close down old, carbon-spewing thermal power plants, advising the utilities to close them and putting the land vacated to alternative uses.

But that is just an advisory. Where is the money for climate action, asks Arivudai Nambi, Head, India Adaptation Strategy at the World Resources Institute. “The Budget missed out on the replenishment of the much-needed National Adaptation Fund for Climate Change (NAFCC),” says Nambi, who has been a part of India’s negotiating team at the climate talks in the past.

India is particularly vulnerable to climate change. The NAFCC was set up in 2015 to “meet the cost of the adaptation measures in areas that are particularly vulnerable to climate change”, according to the website of the Ministry of Environment, Forests and Climate Change.

“If there is no fund flow or new projects, it would affect the resilience capital of the respective agro-ecological zones, which would, in turn, affect our Nationally Determined Contributions,” Nambi told Business Line.

Nationally Determined Contributions, which the Finance Minister referred to, are the commitments made by each country at the Paris climate talks in 2015.

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Published on February 02, 2020
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