While opinions on the Union Budget 2020 vary across different sectors of Indian industry, there is a general sense of approval regarding the continued emphasis on transitioning towards a renewable energy-driven economy. As part of India’s commitment under the Paris Agreement, the country has pledged to generate 40% of its total energy needs from non-fossil sources by 2030. In 2019 alone, this target reached 17%, with an installed capacity of 35%. This progress signals a positive trajectory and reinforces the nation's climate goals.
The budget shows a clear commitment to renewable energy, with the Ministry of New and Renewable Energy (MNRE) receiving a 10.35% increase in allocation. This represents a consistent 10% annual growth over the past three years, starting from the 2017-2018 financial year. Such steady investment is essential for maintaining momentum in the renewable sector and achieving long-term environmental targets.
Beyond just numbers, the comprehensive approach taken in the budget highlights a strategic shift towards sustainability. The focus is not only on expanding renewable capacity but also on creating a supportive ecosystem that encourages innovation, investment, and public participation. Several key initiatives have been introduced or expanded to support this vision, as outlined below.
Kisan Urja Suraksha Evam Utthaan Mahaabhiyaan (KUSUM)
Launched in 2018, the KUSUM scheme aims to install solar-powered irrigation pumps in rural areas where the electricity grid is not yet accessible. Initially targeting 17.5 lakh 3 HP pumps, the program was later expanded to include 10 lakh more units in grid-connected regions. This initiative not only promotes clean energy use but also enhances agricultural productivity and income. Farmers benefit from reliable power supply and the ability to sell surplus energy back to the grid, aligning with the government’s goal of doubling farmers’ incomes.
This year’s budget has further boosted the program, raising the target to 35 lakh pumps and allocating 700 crores for expansion. An additional 300 crores has been set aside for using barren land for solar power generation, aiming to produce 4 GW of electricity. If implemented effectively, this could significantly boost rural incomes while reducing reliance on fossil fuels. However, concerns about groundwater overuse remain, emphasizing the need for careful monitoring and sustainable practices.
India currently has around 3 crore diesel or electric irrigation pumps, which contribute to both high fuel imports and environmental degradation. Shifting to decentralized solar power offers a promising solution, not only helping meet climate targets but also providing cost-effective and cleaner energy for rural communities.
Encouraging Solar Power Generation by Railways
The budget has set an ambitious target of 18-20 GW of solar power generation by the railways. This includes solar installations along railway tracks and on rooftops at railway yards. A pilot project in Bina, Madhya Pradesh, in collaboration with BHEL, is expected to be operational by March 2020. With a capacity of 1.7 MW, it will supply 25 lakh units annually to the railway grid, supporting traction systems and reducing dependence on conventional energy sources.
Corporate Tax Reduction for Renewable Energy Units
To encourage the establishment of new renewable energy projects, the budget extended the 15% corporate tax rate—previously applicable to new manufacturing units—to renewable energy facilities. This move is designed to attract more private investment and accelerate the growth of the sector.
Abolition of Dividend Distribution Tax (DDT)
A major barrier to foreign investment in renewable energy was the taxation of dividends. The budget has now abolished the Dividend Distribution Tax, making the sector more attractive for international investors and promoting greater capital inflow.
Smart Metering Initiative
The smart metering initiative aims to reduce the financial burden on power distribution companies (DISCOMS) by introducing prepaid meters similar to mobile phone SIMs. Users can load their meters with pre-paid credits and choose their energy provider, enabling dynamic pricing based on time-of-day tariffs. The goal is to transition all households to smart meters within three years. However, with each meter costing around 3,000 INR, the funding mechanism remains unclear, especially given the logistical challenges involved.
Overall, the budget signals a strong and forward-looking commitment to renewable energy. While challenges remain, the initiatives outlined reflect a bold step toward a cleaner, more sustainable future for India. The sun is indeed shining brightly on the solar sector.
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