Budget 2024: Green energy sector pitches for GST cut, easier FDI norms. Here is the wishlist

Union Budget 2024: With India’s ambitious clean energy targets reaching a fever pitch, all eyes of the renewable energy sector are set on the upcoming Union Budget 2024. Seen as a pivotal instrument in propelling the nation’s green agenda, the Budget holds the key to unlocking investments, streamlining policies, and accelerating the transition towards sustainable practices.

A collective vision of 500 GW of renewable energy by 2030 served as the North Star for the sector, and key figures have outlined critical expectations to ensure smooth sailing.

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Stakeholders called for higher capital expenditure in renewable energy, particularly in bioenergy, solar, and wind projects. Investments in green hydrogen and battery storage infrastructure are crucial to meet the challenging targets. 

“A Demand-Driven Future: Introducing Green Hydrogen Purchase Obligations (GHPOs) would create a guaranteed market for green hydrogen developers, catalyzing investments and reducing project risks. This forward-thinking policy is crucial to unlocking the vast potential of green hydrogen in sectors like transportation and green ammonia production,” said Bikesh Ogra, MD & CEO of Jakson Green Privated Limited.

“PLI schemes for renewable manufacturing and viability gap funding for battery storage are imperative,” said Gaurav Kedia, Chairman of the Indian Biogas Association.

“Addressing India’s dependence on solar panel imports, which reached $1.13 billion in the first half of the current financial year, is a pressing concern. Therefore, the Budget should incorporate measures to promote indigenous development, facilitate technology transfer, and incentivise localised manufacturing initiatives to conserve foreign exchange. More proactive measures and fiscal incentives should be provided and efficiently implemented to make India a BESS manufacturing and R&D hub,” said Vaibhav Roongta, Chief Business Officer - Rays Power Infra.

To boost hydrogen’s competitiveness, addressing the Goods and Services Tax (GST) rates is imperative. “Lowering the GST rate for hydrogen to, for instance, 5%, makes it more affordable for various sectors, including transportation and industry. Similarly, reducing the GST rate for electrolyser manufacturing from 18% to a competitive rate, e.g., 5%, encourages domestic production and fuels growth in the hydrogen sector,” said Derek M Shah, Sr. Vice President & Head, L&T Energy.

“Our expectations extend to the reduction of duties on electrolysers, increased budgetary allocation for batteries and electrolysers under the Production Linked Incentive (PLI) scheme, and a revision of GST rates for the renewable energy sector, critical aspects, unfortunately, missing from previous budgets,” said, Manish Dabkara, chairman and MD EKI Energy Services Ltd.

"Budgetary measures such as focusing on workforce development by adopting AI-driven technology, bulk procurement, and energy storage solutions will enhance efficiency and competitiveness. Strengthening infrastructure, promoting public-private partnerships, and streamlining regulations are essential steps that will pave the way for a sustainable energy future. All in all these collaborations working cohesively will align the nation to achieve cleaner and more affordable energy sources,” said, Gyanesh Chaudhary, Chairman & Managing Director, Vikram Solar Limited.

Additionally, mandating the inclusion of solar panels in new houses above 300 square yards encourages the integration of renewable energy from the ground up, as per Vishal Sharma, Founder Partner and Principal Architect, Confluence.

Steps to improve investment climate

“We anticipate the government’s clear direction, allowing green FDI in Indian decarbonisation efforts through international carbon market instruments, such as Article 6.2 and the voluntary carbon market. Additionally, we recommend reducing customs duties on solar imports, enhancing concessional finance availability and adopting a strategic approach to address the challenges faced by the sector,” Dabkara opined.

For expediting investments in this nascent sector, where most of the large Indian public and private sector energy players have shown interest, a dedicated nodal agency akin to SECI or a subsidiary under SECI can be set up, with initial capital from the GoI, as per Devansh Jain, Chair of the Renewable Energy Committee, PHDCCI and Director of Inox Wind Energy.

India is an attractive market for foreign investors wishing to invest in RE projects, bringing in cheap capital. However, a more conducive environment, which provides stability of returns on investment, is required, Jain added.

Bottlenecks for renewable energy adoption

Many states impose additional restrictions on installed transformer capacity, hindering the large-scale implementation of solar plants in development. Private distribution companies are reluctant to endorse unrestricted 100% net metering, emphasising the need for government incentives in the Budget to drive significant progress in expanding India’s renewable energy capacity and achieving environmental goals, explained Shaon Sengupta, Director and Head - of North India, Edifice consultants.

The financial viability of numerous renewable energy initiatives has been compromised by shifting regulatory frameworks and disproportionate cess impositions, as per Ramnath Vaidyanathan, AVP & Head of Environmental Sustainability, Godrej Industries.

What is needed to increase affordability?

“A reduction in the customs duty on solar cells from 25% to 0% or 5% would provide a much-needed relief and boost to the Indian solar module manufacturing sector while also reducing the prices of solar modules for the large-scale development of solar power production capacity and improve the competitiveness of RE tariffs,” said Manikkan Sangameswaran, Executive Director & CEO, Radiance Renewables.

“Increased central subsidies or the introduction of Viability Gap Funding (VGF) for Compressed Biogas (CBG) plants and fuel offtake guarantees would unlock the immense potential of this clean fuel source,” Ogra added.

The sector needs an extension of the Inter-State Transmission Charges (ISTS) waiver for renewable projects commissioned beyond June 2025, as per Jain. He also called for penalties on non-compliance of RPO by states, in addition to schemes incentivising green power consumption by retail consumers.