Energy sector budget wish list: green energy funds, more domestic production

Sector executives expect GST rates to be reconsidered across the renewable energy supply chain and a funding gap in viability for newer sectors

In recent years, new clean energy sectors have emerged, including fuels such as green hydrogen, plant-based biofuels, energy storage, and more | Photo: Shutterstock.com

Shreya Jai New Delhi

As India’s energy transformation accelerates, the power sector is pinning hopes on the upcoming Union Budget, which is expected to catalyze policy support and fiscal benefits. Sector executives expect a reconsideration of GST rates across the renewable energy supply chain, financing the profitability gap for newer sectors like green hydrogen, offshore wind, energy storage and others.

Srivatsan Iyer, Global CEO, Hero Future Energies, said the green energy industry is seeking reduction in GST rates on renewable energy components.

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“Reducing GST on solar modules, wind turbines and electrolysers from the current rates to 5 per cent would significantly reduce project costs, thereby bringing down the cost of renewable energy and hydrogen for consumers across India,” Iyer said, adding that reducing or eliminating customs duties on imported solar cells and modules would enhance the economic feasibility of solar and green hydrogen projects.

Echoing the same hopes, SK Gupta, CFO, AMPIN Energy Transition said the government should also consider removing the mandate to purchase ALMM-approved solar modules, especially in the commercial and industrial segment. He said since the capacity of the ALMM list is lower and there is no direct subsidy, the government should relax the mandate. ALMM is a Centre-approved list of solar equipment suppliers that includes only domestic players whose capacity is lower than demand.

However, Gupta also said the budget should encourage manufacturing of key equipment for modules and cells within India itself by promoting appropriate policies, regulations, financial and tax systems. “India has a long history of domestic manufacturing of equipment, but our dependence on machinery and equipment for RE production is almost 100%. In the next phase, this dependence should be reduced to zero,” he said.

New sectors need new rules

In recent years, new clean energy sectors have emerged, including fuels such as green hydrogen, plant biofuels, energy storage, and others. Energy sector experts point out that initial subsidy support, easing taxes on imports of key raw materials would help the domestic industry to develop rapidly.

Iyer said the industry is hopeful the budget will support the growth of green hydrogen and battery storage through viability gap funding and subsidies. “This support is essential for hydrogen to become competitive with other alternatives and support the development of a robust battery storage market,” he said.

Raju Kumar, partner and energy tax leader at EY India, said the green hydrogen mission, which began in 2021, will require policy support to address infrastructure, storage and transportation challenges. “On the GST front, important areas to consider would be reducing GST on hydrogen to promote greater adoption and bringing natural gas under GST,” Kumar said.

Earlier this year, the Centre announced a new scheme to promote rooftop solar power. While the scheme has been earmarked with Rs 75,000 crore of central funding, Kumar believes that if rooftop solarisation is ramped up quickly, power distribution companies “can get financial support to develop nationwide transmission and metering infrastructure.”