The industry expects an overhaul of the incentives and subsidies that are currently being given out to the sector.
NEW DELHI: The government may revisit incentives and subsidies for the renewable energy sector given the tariffs have been falling to almost match the levels of thermal power.
“There is a case for revisiting the subsidies and incentives being given to the renewable energy sector,” said the Economic Survey 2018, introduced in Parliament on Monday. “Currently, the levelised tariff is approaching grid parity,” it said.
The industry is now bracing for an overhaul of incentives and subsidies, and some said this could impact their pricing.
“The government is definitely not encouraging renegotiation of PPAs (power purchase agreements),” a leading renewable energy developer said on condition of anonymity. “In the same spirit, taking back the incentives given to projects already may not be tenable, because it might lead to legal trouble,” the person said.
“Going forward, it looks like the intent is to take away the incentives. So people in business will go back and do their maths once more because there is a correlation between the incentives and prices. It remains to be seen how much they are pulling out and which area is being affected.”
The government, so far, has played an active role in promoting adoption of renewable energy resources by offering various incentives such as generation-based incentives, capital and interest subsidies, viability gap funding, and concessional finance.
Renewable energy has been placed under priority sector lending and a bank loan for solar rooftop systems is to be treated as a part of home loan/home improvement loan with subsequent tax benefits.
“The government has progressively tapered down the tax incentives in previous years and may discontinue it fully this year,” said Kameswara Rao, leader-energy, utilities and mining at PwC India. “Instead, it may channel incentives into new areas, such as offshore wind, electric vehicles, and energy storage,” he said.
India has set itself a target of achieving 175 GW of renewable energy capacity addition by 2022.
Currently, the ministry of new and renewable energy (MNRE) provides state-specific capital or tariff-based subsidies to solar rooftop systems, and exemption of ISTS transmission charges for the inter-state sale of energy from wind and solar, among other incentives to the sector.
The Economic Survey said affordable financing holds the key for financing sustainable energy projects. “Risk mitigating instruments such as payment guarantee fund or a foreign exchange fund available to developers could be a way forward,” it said.
Source: ET ENERGY WORLD