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Market Updates

The RE sector hopes for a huge stimulus for investment from the Union Budget 2019

Renewable-Energy

Mr. Tulsi Tanti, Founder, Chairman, and Managing Director, Suzlon Group

by Tulsi Tanti

The World Bank’s Economic Prospects Report has forecast India’s economy to grow by 7.5 percent during this and the next two fiscal years, retaining its top spot as the fastest-growing major economy. India’s growth estimate is the brightest spot in a grim forecast for the world economy.

 

 

The continuation of the National Democratic Alliance (NDA) Government, led by Prime Minister Shri Narendra Modi, augurs well for the key sectors of the economy, including the renewable energy sector, which has been focus areas of the Government.

The industry is looking for a huge stimulus for investment, push for ‘Make in India’ initiative, lowering of taxes and streamlining of GST so that tax collections will go up and investment will be improved.

Given this background, the following are the key expectations of the Renewable Energy (RE) industry from the upcoming Union Budget.

  • Re-introduction of accelerated depreciation at a rate of 80% for windmills and solar projects to retail investors with project size less than 25 MW. The step, besides providing a level playing field for SME and small investors and continue diversity in investments in the sector, will also benefit Central Public Sector Enterprises (CPSEs).
  • GST on services relating to setting up, power evacuation and operation & maintenance services (OMS) of a Renewable Energy project should be capped at 5% from the present 18%. The services for Balance of Plant (BOP) that are the services required for setting up and power evacuation of the Renewable Energy Project should be taxed, at the rate of 5%. Tax Operations & Maintenance Services (OMS) should also be taxed at a rate of 5%
  • Concessional rate/ preferential rate of finance is required with a 2% rebate as cost and availability can potentially impact viability. This will directly benefit consumers as energy prices will be kept low.
  • The export incentive must be hiked from the present 2% to 10% to make Indian exports competitive in the global market. Also Power Finance Corporation (PFC) and Indian Renewable Energy Development Agency Limited be mandated to allow issuance of the line of credits to OEMs for exports from India
  • The activity of generation and distribution of power should be included in provisions of section 32(1) (iia) (Additional depreciation), 32AD (Investment allowance for setting up projects in backward area of AP and Telangana) and 115BA (Section allowing an assessee to opt for concessional rate of tax of 25%)
  • The profits of the undertaking engaged in the business of generation and distribution of power and infrastructure business were allowed to be reduced from the book profits for the purpose of calculating MAT. This should be restored.
  • Open access and ISTS charges waiver (like SECI bidding) to all manufacturing units for their captive power requirements should be allowed.
  • Create recurring income for farmers through the Farmer’s Scheme in FiT based projects.

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