[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 (Gol) as demonstrated within the prescribed limit. Further from power sector through so far, the Given the push for 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. It would also play a incentives on increasing private sector investments major role in reduction of any trade balance gap that might exist between in key sectors would have gone a long way to ensure India and other countries. a healthier growth trajectory for the economy.

existing projects under stress or stalled or Dr. Ashok Haldia, MD b CEO, PFS (PTC India Financial Services Ltd) under implementation and new projects. We can expect increase in the demand of finance and fund raising opportunities. Permitting 'Great positive for investment in 'A' rated bonds would boost fund infrastructure sector' raising options particularly for inf rastructure The Budget rightiy focuses on the rural and projects . Focus on schemes, such Saubhagya infrastructure growth, which are the backbone Yojna for Power for All coupled with impetus of Indian economy. 50 percent higher spend on rural spending all together would generate on the infrastructure sector will reboot the electricity demand. Installation of rooftop solar demand -economic wide, and create jobs under smart city projects would further boost through multiplier effect that is a big concern achievement of 175 GW renewable energy for everyone. This would as well raise demand mission. Overall, the Budget is inclusive in for funds and funding opportunities for nature and shot in arm for infrastructure Gyanesh Chaudhary, MD and CEO, Vikram Solar

'Budget has limited allocation to MNRE with a target to achieve 11GW' 'No change in customs duty Budget 2018-19 is not very on solar panels is a good encouraging for the renewable and solar energy sector. The news for developers' government has missed out on a major opportunity to take a lead towards combating "This years budget is in line with expectations, climate change. The recently released Economic Survey highlights the impact of climate with a focus on all sectors and strata of society. The change in India especially to farmers. It mentions that rainfall extremities have increased Governments Budget of 2018-19 aligns with the overall in the past 10 years and climate change can potentially reduce farmers income by the plan of reducing the corporate tax rate gradually. The range of20-25%. Renewable Energy, especially solar can play a very crucial role to reduce corporate tax reduction from 30% to 25% for businesses the impact of climate change on our communities. with revenue up to 250 crore is definitely a positive move Unfortunately budget has not taken steps to create an eco-system which would make towards a lower tax regime. E-assessment of income / combating climate change a possibility. The budget has very limited allocation to MNRE Corporate tax is very significant structural reform as with a target to achieve 11 G W of installations in the next financial year. Allocation proposed, and will reduce human interference, with long to SECI has also seen a reduction. A large chunk of the coal cess which was earlier term benefits in ease of doing business. transferred to National Clean Energy Fund now goes towards GST compensation fund. Taxation of long term capital gains at 10% was The budget does not talk about any alternative mechanism which would fund clean expected, and the fact of it not being implemented energy installations in India. In terms of energy security, currently we import 85-90% retrospectively is definitely a thoughtful move. There of our solar modules, which threatens our energy security. The current provisions in seems to be no change in customs duty on solar panels, the budget do not mention any support for the manufacturing industry which has been which is good news for developers like CleanMax Solar highly discouraging for the sector. We hope that government will take additional steps to and for the growth of the solar industry in India." increase installations of solar power plants by providing direct and indirect support.

Hartek Singh, CMD, Hartek Group Kunwer Sachdev, Managing Director, Su-Kam 'Need of Smart Grids 'Announcement of to increase' 20 GW of solar power capacity in railways Hartek Group, with its will go a long way in power sector expertise, is well placed to support the adoption of solar railway electrification and modernisation for which energy' Government of India has announced CAPEX allocation "The announcement of establishing 20 GW of of Rs 1.48 lakh crore. With an expertise in providing solar power capacity and feeding 7,000 railway complete EPC solutions, we are positive towards finding stations with solar power will go a long way in opportunities in this domain and being an active part of the adoption of solar energy. Mea sures such as the country's growth story this year. Also, with 99 cities lower corporate rate for small enterprises, the selected and an outlay of Rs 2.04 lakh crore allocated increased turnover limit under Presumptive under the Smart City Mission, requirement of Smart taxation scheme under section 44AD of Grids will increase as these are essential to support the Income Tax Act for assessees in MSME seamless power infrastructure for different Smart City category will create an enabling ecosystem for functions. Hartek Group looks forward to playing an startups in the renewable energy category' important role in realisation of the this mission. Anmol Singh Jaggi, Director, Gensol Group

'Smart city mission to give a major boost to the clean energy sector'

With a thrust on smart cities and identification of 99 cities under the ambitious Smart city mission will give a major boost to the clean energy sector as Smart Cities have a large component of Renewable Energy. aims at building 100 smart cities with state-of- the-art amenities that incorporates renewable and natural resources with great emphasis. It is a clear indication that the focus on green energy' is one of the top priorities of the Vikram Kailas, Mytrah Energy government It will also boost the solar rooftop industry. These cities will be enabled by various projects like Smart Command and Control 'Social sector Centre, Smart Roads, Solar Rooftops, Intelligent Transport Systems, Smart Parks. initiatives will Projects worth * 2350 crore have been completed and works ofv 20,852 crore are under progress. We expect will create a platform for the Supervisory control and data benefit from acquisition (SCADA) industry as well. increased allocation With the aim - 'Power for All,' the government is determined to not leave any stone to schemes like unturned in its target of meeting 100% electrification by 2018 as in the budget, it has DUG JY and been announced that there will be an increase of 35% of expenditure allocation to rural Saubhagya' electrification schemes. We are happy that government has highlighted the benefits and advantages of solar- Insofar as renewable power is concerned, generated power and has acknowledged its practicality. The budget has announced the the social sector initiatives will benefit second phase of solar development of another 20,000 MW that will surely prove to be a from increased allocation to schemes like major push for India to be one of the leaders in the global solar industry. DUGJY and Saubhagya. This will provide Besides their commercial and individual uses, solar power has also been beneficial further impetus to efforts to provide to Indian Railways as well as the peripheral railway infrastructure will be solarised. rural households easier access to clean, In the rural areas too, farmers are switching to use of solar power for pumping and reliable power. Likewise, the increase in irrigation purposes. In the Budget, Government has also taken appropriate measures to the revenue ceiling for reduced corporate encourage the initiative and has announced that the State Governments will formulate tax rates should benefit the smaller a mechanism where the distribution companies or licensees will purchase the farmers manufacturers. However, the continuing surplus solar power at reasonable remunerative rate. uncertainty over the various duties Even though there has been a 6 per cent excise duty on solar tempered glass imposed on solar components will be a has been proposed, the basic customs duty on solar tempered glass for use in the drag, especially for larger scale projects." manufacture of solar cells, panels and modules has been proposed to be eliminated.

the solar energy sector has been ignored in Gagan Vermani, Founder b CEO, MYSUN this year's budget. It wa s much awaited that the Finance Minister would clear the government's 'The budget will help view on customs duty on solar cells and India achieve higher modules, but that has not materialized. GDP forecasts for next Overall, with its overriding focus on farmers, year' the budget is expected to give a boos t to rural consumption which in turn will help India The election year' has taken the shine away achieve its much higher GDP forecasts for the from the 'Sun'. It is disappointing to see that next year. Shekhar Singal, MD, Eastman Auto b Dibyanshu, Partner, Khaitan b Co. Power Ltd 'Budget will promote The budget clean energy, access provides to power and energy impetus security' to solar rooftop We welcome the budget! It is a people focus targets for budget With the announcement of promoting achieving electric vehicles, centre may lower GST and pass the RE benefits to buyers, will give a major impetus to targets' the shift to clean energy. However, in the renewable energy sector there are number of policy decisions The Finance Minister has announced in the budget that related to import duties and domestic manufacturing, which needed to be addressed the Government of India will take necessary measures and to further boost the sector. Also, achieving the target of 175 GW of renewable encourage State Governments to put in place a mechanism energy capacity and generating it by 2022 requires a lot more to be done than simply that the surplus solar power generated by farmers is increasing the budgetary allocation. purchased by the distribution companies or licencees at reasonably remunerative rates. The move is a welcome step in trying to encourage self-reliance and productivity of rural households and at the same time providing impetus K N Subramaniam, Member of to solar rooftop targets and achieve the renewable energy General Council, Indian Solar targets. It will be important to see how this scheme is Manufacturers' Association (ISMA) operationalised by the Govt.

'Saubhagya will be truly transformational' 'Saubhagya is one of the Powerful tools which was in top of the Agenda and PM Modi launched the program in September 2017, to deliver 24*7 Power to 40 mill Rural and Urban Poor by December. In this budget there is an allocation of Rs 16400 cr for Saubhagya to ensure 'Sahaj Bijli Har Ghar Yojana ' to those who have not seen benefits of Power. Saubhagya will be truly transformational and benefits of economic growth will touch the bottom of the pyramid in terms of population The earlier Scheme DUGJY (Deendayal Upadhyay Gram Jyothi Yojana) was to ensure power reaches every village and current Scheme takes the next D.V.Giri, Secretary General, Indian Wind Turbine step of connecting Households Manufacturers Association The Budget has done another path breaking change for farmers in terms of buying excess power generated from solar pumps, by Discoms or 'Overall a good budget but Licensees at a reasonably remunerative price. This will certainly promote no specific mention of wind solar pump usage in farms and also give a fillip to manufacturing sector who will supply the sole Pump solutions energy' Solar Installations have reached 20000 mw + in Dec 2017, four years It is a good budget for Sectors of Rural, Agriculture, ahead of targeted year of 2022 as per Jawaharlal Nehru National Solar Education and Healthcare. MSME Sector gets relief on Mission 2010 ( J NNSM). Now, is the time to promote aggressively Domestic Corporate Tax. How ever, there is no specific mention Manufacturing, though it may lead to a small increase in solar tariffs, but in for Renewable or Wind Energy. Our Pre Budget the long run provide self-sufficiency and energy-security. Memorandum submitted has not been addressed. Jaideep Malaviya, Secretary General Solar Thermal Federation of India (STFI) 'Feeding excess power from solar irrigation pump sets is a market driver for solar energy business' It was expected to announce measures to protect domestic solar water heating industry with a higher import duty announcement but it did not happen. The 10% social tax on imported goods will benefit the government rather than encou rage 'Make in India. The shining ray, however, was the doubling of allotment for food processing industry & process heating can find business for solar thermal markets with more industries coming up. Feeding excess power from solar irrigation pump sets is a market driver for solar energy business but it need s to be seen how electric utilites give anticipation. Rahul Walawalkar, Executive Director, India Energy Storage Alliance (IESA) Raju Kumar, Tax Partner, EY India Energy Storage and iSST microgrids to play a vital Budget offers a step Z role in Smart Cities in the right direction O TJ Honourable Finance minister has made a welcomed for RE sector o move by stressing on building a strong infrastructure £ both for Roadways, Railways and Smart Cities which we are sure will include Electric Transportation and rVi I proposed focusing on the renewab le optimal electrification of the railways. As part of the [•_1 E|^ energy such as Galvanizing Organic Bio- Smart Cities, Energy Storage and microgrids will play Agro Resources Dhan (GOBAR-DHAN) a vital role. Improving power quality and reliability is for management and conversion of cattle dung and solid waste in farms the backbone for effective implementation. This will be to compost, fertilizer, bio-gas and bio-CNG. a big push for IESA member companies. Further, considering that the cost of renewable energy is largely a function Govt, increased the allocation money under FAME of initial investment cost, there need to be more incentives for capital scheme but its non-ambitious goals of 100% EV s subsidies and tax holidays encouraging more investment on a larger scale by 2030 is minimal. We are looking forward for the in such facilities across nation. The fact that the government has proposed National Energy Storage mission which should lay out to launch schemes like "Prime Minister Saubhagya Yojana" (targeting to more specifics about EV's. This is a good start, but we provide four crore poor households with electricity connection) or "Ujjwala expect lot more clarity & initiatives from the Govt for Yojana" (to provide free LPG connections to the poor of this country) 100% electrification targets. indicates a large reliance on the energy sector in the near future.

solar water pumps installations by farmers. The Ashish Khanna, ED b CEO, Tata Power Solar government will be taking necessary measures to encourage distribution companies to purchase Innovation of excess solar power generated by the farmers while CD combining solar energy harvesting the suns energy for the solar pumps. o for power needs will be This innovation of combining the usage of solar 2 energy for power needs as well as a source of > a paradigm shift CO earnings will be a paradigm shift in the manner (A In this budget, Finance Minister has announced solar energy is utilized by majority of farmers in an innovative scheme which will accelerate this country.