POLICYMAKERS B INDUSTRY REACTION to the BUDGET 2018-19
Total Page：16
File Type：pdf, Size：1020Kb
[BUDGET I REACTIONS] POLICYMAKERS b INDUSTRY REACTION TO THE BUDGET 2018-19 Sabyasachi Majumdar Senior VP and Group Head- Corporate ratings, ICRA Limited Thrust towards solar energy, in line with policy focus to support capacity addition large funding requirements. Especially in Duty has recently recommended the renewable sector, the ability to ensure the provisional safeguard duty of 70% on long term debt funding at cost competitive import of the solar modules/cells, which rate remains critical for the developers/ is yet to be finalized. In this context, IPPs, given the single part & fixed nature of clarity is required on the applicable competitively bid tariff in the PPAs which are duties for solar cells/modules, given the mostly long tenure. Further, the reduction in large sized bidding pipeline announced tax rate to 25% for entities with turnover of by Ministry of New & Renewable Rs. 250 crore is a positive for renewable IPPs, Energy (MNRE), Gol so as to meet the given that a majority of them have capacities cumulative capacity targets under NSM With a strong policy focus on renewable energy of less than 200 MW and thus revenues by FY 2021-22. by Government of India (Gol) as demonstrated within the prescribed limit. Further from power sector through National Solar Mission so far, the Given the push for Make in India so as to perspective, budget shows a thrust Budget 2018 shows a thrust as seen from the encourage the domestic manufacturing, budget towards ensuring electricity access proposed measures which should facilitate the has highlighted the import duty reduction from (24x7) to all rural households as solar capacity addition. Budget has outlined the 5 percent to nil on solar tempered glass which seen from schemes like "Saubhagya proposed mechanism to buy surplus solar energy would thus result into a marginal reduction & DUGJY" which in turn is likely to from agriculture solar pumps by the distribution in module cost & hence, would be positive for provide a boost in energy demand to utilities at a reasonable price. Moreover, the domestic solar PV module manufacturers. The some extent, apart from improving the budget has given a push for deployment of solar budget has also provided allocation towards quality of life for rural households. energy under smart city programme. Also, the funding requirements in the wind sector higher capex proposed by railways (including for (particularly for GBI benefit) as well as part- Renewable Energy: Proposals capacity creation & electrification of network) funding requirements under the green energy • Mechanism proposed to buy surplus would also lead to demand for deployment of corridor which is critical for strengthening of solar energy from solar pumps by the solar energy for meeting its energy requirements. network for evacuation of green energy in RE discoms at reasonable price Besides such policy support, an improved tariff rich states. • Increased capex by Railways particularly competitiveness of solar energy also remains a Nonetheless, the uncertainty over imposition for electrification & augmentation of line critical factor which should support the capacity of duties (import duty / safeguard duty / anti network addition in a sustainable manner, given the sharp dumping duty) including timelines & quantum • Allocation of Rs. 4200 crore for capacity drop in PV module price levels internationally thereof continues for the solar energy sector. addition in wind power, solar power and over the last 2-3 year period. On import duty front, solar modules have green energy corridor The budget has also announced measures been subject to 7.5 percent import duty at port • Measures proposed to facilitate the to facilitate the access to bond market for authorities under the customs classification of access to bond market for meeting the meeting 25 percent of debt needs by large electric generating system and in turn, modules 25% of debt needs by large corporates, corporate which will allow the entities in have been released by port authorities to the IPP/ including those rated in "A" category. power & renewables to diversify the funding developers under provisional release against • Reduction in corporate tax rate to sources at cost competitive rate, given the the bank guarantee, based on Industry sources. 25% for entities with turnover of upto highly capital intensive nature of sector & Further, the Directorate General of Safeguard Rs. 250 crore [BUDGET] Sambitosh Mahapatra, Partner, PWC UNION ET 2014 discoms told to purchase solar power 4 from farmers' 1 3feif State discoms have been told to purchase solar power from farmers. It can provide an income stream to farmers if they install solar pumps. The hydro and gas are stressed and it should have been addressed, while distribution reforms pending. Regulatory capacity enhancement could have happened. Manish Aggarwal, Partner and Head- Corporate Finance - M&A, Debt Advisory - Infrastructure Head - Energy and Natural Resources, KPMG India 'Facilitation of farmers to set up distributed solar projects holds a greater promise' A cornerstone of th e Budget 2018 i s to further the access to energy agenda to the marginal section of the population. Enhancement of the 'Ujwala' scheme to provide free LPG gas connections Tulsi Tanti, Chairman and Managing Director, Suzlon Energy to 80 million women, reiteration of commitment under 'Saubhagya' scheme 'Budget gives impetus to MSME's - the to electrify 40 million h ouseholds and facilitation of farmers to set up distributed backbone for the wind energy' solar projects holds a greater promise for The budget has given significant impetus to MSMEs who are the backbone for the wind energy the currently unserved energy consumers. sector of India, as they manufacture components and provide various services. Reduction of These schemes hold a potential to corporate tax for MSME's will help them to reinvest the surplus capital in establishing newer enhance energy demand greatly and thus units to meet the overall target of 175 GW renewables by 2022. Also, governments initiative to may help bring the stra nded capacity recapitalize PSU banks, enables the banks to provide loans to MSME's. on-line. Access to financial markets for However, I am hopeful the finance minister will consider the following to enable Nations Energy energy sector companies is likely to be Security, sustainable and affordable power for all: kick-started by facilitating investment • Reinstate Accelerated Depreciation to the tune of 80% to small domestic investors with project by long term savings based institu tional size less than 25 MW, till at least FY 2022 to enable the 175 GW RE target. This will also benefit investors through measures announced Central Public Sector Enterprises (CPSEs) and will also give impetus to the governments Make for kick starting the bond markets in in India vision India. Smaller companies particularly in • Prov ide 50 paise/kWh as incentive to Performance Based Incentive (PBI) to state DISCOMs distributed energy space with turnover for procuring RE based on FiT for small projects of 25 MW below INR 250 Crore will benefit by a • Export incentive td achieve manufacturing target of 10,000 MW+ per annum, by increasing lower tax rate. Mention of CPSE Inv ITs export incentive from 2% to 5%, to make Indian exports competitive in the global market. increase the hopes of power sector PSUs Overall, the measures on the economic reforms, ease of doing business and impetus for the being able to access market to raise equity social sector are steps in the right direction for the growth of Indian economy in the long-term. capital in innovative manner." REACTIONS Hitesh Doshi, Chairman b Managing Director, Waaree Group 'Budget 2018 is extremely balanced' 'Govt could have focused The Union Budget 2018 has been extremely balanced, and restored our belief on incentives to increase in the Government for ensuring continuous growth of Indian manufacturing private sector investments sector. Coupled with the sentiments on the provisions for boosting solar in key sectors' presence in the country, we are moving towards an expedited growth in the renewable energy sector, especially for domestic manufacturers. We Transitioning to renewable sources of energy has are looking forward to play a role in helping the country move towards a been an area the government has focused on in the sustainable future of renewable energy security. Especially, with the smart city past and is resolute on, for the future. The sector initiative embracing rooftop solar, we at Waaree Energies are ready to deliver. was hoping for greater clarity - particularly with We are also looking forward to help the Government fulfil its regard to anti-dumping and safeguards duties, ambitious goal of providing free electricity to 4 crore rural households, in view of meeting the 175 GW target set by the in addition to creating more employment opportunities as part of the Prime Minister. It is still heartening to note that Indian manufacturing sector. We also applaud the Government for a mechanism is being created to procure and acknowledging the role of MSMEs with the announcement of the reduced wheel surplus solar power from the agriculture rate of 25% for companies with a turnover of up to INR 250 crore in 2016 sector for supply to the grid. This, coupled with an - 2017. We hope it results in increase of skill development and adaptation increased public investment of Rs 16,000 crore in of new technologies and innovations across industries. the Saubhagya scheme to electrify 4 crore homes, are The elimination of customs duty on solar tempered glass, manufacturing laudable steps. solar panels will become relatively cheaper. Further, financial support Overall, the government has done its best to and renewed investor interest in the solar manufacturing sector would be address the interests of both the common man welcome, as it will help boost the manufacturing and value chain in the and business. However, some additional focus and country, and in turn help with the energy security.