Budget 2020: Solar Power’s Allocation Rises by 10 Percent
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While India's diverse industries hold varied opinions on the Union Budget 2020 depending on their perspectives, there’s a shared sense of optimism regarding the government’s commitment to transitioning toward a renewable energy-driven economy. India has pledged under its Paris Agreement commitments to derive 40% of its total energy needs from non-fossil fuel sources by 2030. Impressively, by 2019, the country had already achieved 17% renewable energy generation, with an installed capacity of 35%.
The Ministry of New and Renewable Energy (MNRE) has seen a 10.35% increase in its budget allocation this year. Over the past three years, this represents a compounded annual growth rate of approximately 10%, reflecting the increasing importance placed on renewable energy initiatives. This focus not only positions India as a global leader in the pursuit of cleaner energy solutions but also aligns with a more sustainable development trajectory.
One of the most transformative schemes launched under this vision is the Kisan Urja Suraksha Evam Utthaan Mahaabhiyaan, commonly known as KUSUM. Initially introduced in 2018, KUSUM aims to install 1.75 million 3-horsepower solar irrigation pumps in off-grid areas and 1 million pumps in regions connected to the electricity grid. The benefits extend beyond promoting cleaner energy; they also aim to enhance farmers' incomes by allowing them to sell excess energy back to the grid. Additionally, this initiative reduces the costs associated with extending grid electricity to remote rural areas.
This year’s budget has expanded the KUSUM program's targets to include 3.5 million pumps, with an allocation of 700 crores (approximately $94 million USD) for expanding the program and another 300 crores ($40 million USD) for utilizing barren lands for grid-connected solar power generation. The goal is to produce 4 gigawatts of power using this 1,000 crore ($134 million USD) investment. If executed effectively, this could provide farmers with additional revenue streams while making unproductive rural land more valuable. However, there are concerns about the potential overuse of groundwater resources, which could pose environmental challenges.
India currently relies on around 30 million diesel or electric irrigation pump sets, contributing significantly to the nation's fossil fuel import expenses and creating ecological pressures. Shifting toward decentralized renewable energy systems presents immense opportunities to help India achieve its 2030 goals under the Paris Agreement. According to an independent study by the Institute for Energy Economics and Financial Analysis (IEEFA), this transition could also improve farmer incomes while reducing energy costs.
Another notable initiative mentioned in the budget is the encouragement for utilities like the railways to generate solar power. The railways are expected to produce between 18 to 20 gigawatts of power by installing solar panels along railway tracks and rooftops at their facilities. A pilot project in collaboration with Bharat Heavy Electricals Limited (BHEL) is set to go online in Bina, Madhya Pradesh, by March 2020. With a capacity of 1.7 megawatts, it will supply 2.5 million units of electricity annually to the railways’ grid, powering their trains.
To attract more investments into renewable energy, the budget extends the corporate tax rate of 15% to new renewable energy units. Additionally, the dividend distribution tax (DDT), which previously deterred foreign investors, has been eliminated, paving the way for increased foreign capital inflows.
The proposal for smart metering seeks to alleviate some of the financial challenges faced by power distribution companies (DISCOMs). By implementing a system akin to mobile phone SIM cards and handsets, consumers can prepay for electricity usage and choose their service providers. Power suppliers can then charge based on time-of-use pricing. The plan is to replace all traditional meters with smart meters within three years. Given that each smart meter costs around 3,000 INR ($40 USD), funding this ambitious project remains a significant challenge, both logistically and financially.
Despite these hurdles, the overall outlook for India’s solar sector is bright. The combination of policy support, technological innovation, and financial incentives paints a promising picture for the future of renewable energy in the country.