Budget 2025 expectations of the Indian renewable energy industry

Renewable energy continues to be on an all-round growth path with focused policy, regulatory and fiscal support of the current government. This has helped the renewable capacity in the country cross an impressive milestone of 200 GW+ till date. We expect the government to continue this focused support to all sectors of this industry in the coming year’s budget also and expect specific focus to certain areas to help gain all-round long-term self-sufficiency across the value chain in it.

Some of the key expectations of the industry from the budget will include:

In-house technology development

To become self-reliant in any field, in-house cutting-edge technology development and its commercialization is pre-requisite. India has, over the years, proved its leadership position in inhouse development of multiple complex technology fields. With higher renewable energy targets across sectors, a high international dependence across the complete renewable technology value chain must be, therefore, reduced to a minimum. This can only be done by setting up high quality in-house research and design capabilities of the latest order in these fields also. The govt. should immediately start promoting this by providing suitable and strong regulatory and fiscal incentives to set up specialized labs in collaboration with leading international and India research institutions including the likes of IIT’s and other research-oriented bodies. Such a strength will also help us faster indigenize equipment plans for manufacture of various critical components.

Inhouse equipment manufacturing capabilities

While focus in creating domestic capacities in cell and module manufacturing has been a very welcome move in recent years, we are still fully dependent on import of equipment for manufacturing of these critical components, from abroad only. India has earned its name in equipment manufacturing in varied fields in all these years and it is, therefore, time to start focusing on inhouse manufacturing of all equipment for cell and module lines in India only to help achieve completely “made In India” status. The budget should provide the required regulatory and fiscal support for the same. This also applies to inhouse manufacturing of critical equipment for green hydrogen like electrolysers:

As per some of the recent estimates, India will need to invest around US$ 200 billion to meet its clean energy initiative targets till 2030. While the domestic industry is fully committed to drive and support in achieving the required energy targets, one of the most driving factors will be availability of required competitively priced funds from a combination of international and domestic institutions having specific focus on renewable energy development. We appreciate that the government is working on this field and expect steady reduction in lending costs to the industry by putting such projects under ‘priority sector lending.’ Re-introduction of lower Tax Deductible at Source (TDS) rates on interests on external commercial borrowings (ECBs)/rupee denominated bonds will support reduced cost of funding for this industry.
The industry has a long pending request for rationalization of indirect tax. Goods and Services Tax (GST), on turbines and modules, should be reduced to 5% from 12% to help improve viability of renewable projects and help reduce tariff for consumers and the industry.
Considering increasing demand for solar cells and supply demand mismatch in available capacities, the government should consider exceeding its target to introduce ALMM for cells for a further period of five years. Further rationalisation of import duty structure on solar cells is required to strengthen the industry.
Concessional income tax rate @ 15% should be again brought back to boost the investments and should be further extended to five years to help steady growth of the industry.
Exemption of GST on corporate guarantee for renewable energy companies wherein corporate guarantee is provided by holding company to lenders in respect of funding obtained by SPVs.
To help industry move to 100% round-the-clock (RTC) green power, economically viable solutions are a key integrator. The government should provide required policy and fiscal incentives to continue viability gap funding for battery energy storage system (BESS) projects and provide policy support for major battery ventures via tax breaks and subsidies to boost local production.
Interstate charges on power transmission through ISTS connectivity are waived till 2025. This should be further extended over the next five years to give a steeper boost to the commercial and industrial (C&I) segment which has large ISTS opportunities.

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