While opinions on the Union Budget 2020 vary across Indian industries, there is a general sense of optimism regarding the continued focus on transitioning to a renewable energy-based economy. India has pledged under its Intended Nationally Determined Contribution (INDC) under the Paris Agreement to generate 40% of its total energy needs from non-fossil sources by 2030. In 2019 alone, the country achieved 17% of its energy from such sources, with an installed capacity of 35%. This shows progress and sets a clear direction for future growth.
The budget reflects a strong commitment to this vision, with the Ministry of New and Renewable Energy (MNRE) receiving a 10.35% increase in allocation. This marks a consistent 10% rise over the past three years, indicating a long-term strategic shift toward sustainable development. The increased funding not only supports expansion but also reinforces the government’s dedication to clean energy as a cornerstone of economic and environmental policy.
Beyond the figures, the comprehensive approach to renewables is what truly stands out. Several key initiatives are being rolled out to accelerate the transition, some of which are outlined below.
Kisan Urja Suraksha Evam Utthaan Mahaabhiyaan
Launched in 2018 as KUSUM, this initiative aims to install 17.5 lakh solar-powered irrigation pumps in areas without grid connectivity. Another 10 lakh pumps will be installed where the grid is available, offering farmers both reliable power and the ability to sell surplus electricity back to the grid. This not only supports the goal of doubling farmers’ income but also reduces the cost of rural electrification through traditional grid infrastructure.
The 2020 budget has significantly expanded the target, increasing it to 35 lakh pumps. An allocation of 700 crores has been set aside for the KUSUM scheme, along with 300 crores for using barren land for grid-connected solar projects. With a total of 1,000 crores allocated, the aim is to generate 4 GW of power. If implemented effectively, this could provide farmers with additional income while promoting cleaner energy use. However, there are concerns about potential groundwater overuse, highlighting the need for careful monitoring.
India currently has around 3 crore diesel or electric irrigation pumps, contributing to high fossil fuel imports and environmental degradation. Shifting to decentralized solar power offers a promising solution to meet climate goals while boosting rural economies. According to a study by IEEFA, this transition can lead to more affordable and sustainable power for farmers, reinforcing the benefits of the KUSUM program.
Encourage Utilities Like Railways to Generate Solar Power
The budget includes a push for the railways to generate 18-20 GW of solar power, both along railway tracks and through rooftop installations at their yards. A pilot project in collaboration with BHEL is expected to become operational in Bina, Madhya Pradesh, by March 2020. This 1.7 MW project will supply 25 lakh units of electricity annually to the railway grid, helping reduce reliance on fossil fuels and lowering operational costs.
Corporate Tax Reduction
To further stimulate investment in renewable energy, the new corporate tax rate of 15% for new manufacturing units has been extended to renewable energy projects. This provides a financial incentive for businesses to invest in green technologies, supporting long-term sustainability goals.
Dividend Distribution Tax
One of the barriers to foreign investment in the renewable sector was the taxation of dividends. The 2020 budget has eliminated this Dividend Distribution Tax (DDT), making the sector more attractive for international investors and encouraging greater capital inflow.
Smart Metering
The introduction of smart meters aims to alleviate financial stress on power distribution companies (DISCOMS). These meters function similarly to mobile phone SIMs, allowing users to prepay for electricity and switch providers. It also enables time-of-day tariff-based billing, promoting efficient energy use. The goal is to replace all households with smart meters within three years. While the initiative is promising, the cost per meter—around 3,000 INR—raises questions about funding and implementation logistics.
Overall, the 2020 budget signals a strong and sustained push toward renewable energy, positioning India as a global leader in the clean energy transition. With these initiatives, the sun is indeed shining brighter on the solar sector.
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