Indian finance minister Arun Jaitley may have made little mention of solar directly in his budget speech yesterday but industry commentators were broadly welcoming of the spending plans for Narendra Modi's first year in office.
Solar-watchers trying to read the runes and discern whether the newly elected Bharatiya Janata Party (BJP) will follow the recommendation of its ministry of commerce and introduce anti dumping (AD) duties on imported solar products, will have been heartened by Jaitley's stated aim of encouraging domestic manufacturing.
The finance minister's bid to tackle an ‘inverted duties' regime which discourages manufacturing by applying lower taxes to finished goods than to the raw materials needed to make them, has a direct impact on solar, according to Jaideep Malaviya, CEO of the Malaviya Solar Consultancy.
Quoted in a report after the budget speech by the Times of India newspaper, Malaviya said a reduction in the duties applied to panel components such as EVA and back sheets, ribbons, flat copper wire and solar glass, as well as the machinery and equipment used to build solar plants, would reduce the costs of developing a 100 MW solar farm in India by INR50 lakh (US$83,000).
INR5bn fund for projects in three states
Having announced prime minister Modi's aim of having 100 ‘smart cities' across the nation, with the help of an INR70 billion fund to modernize more than 70 mid-tier cities, according to live coverage of the speech by the Wall Street Journal, Jaitley, an-hour-and-a-half after starting his speech, revealed plans for an INR5 billion fund for solar projects in Rajasthan, Tamil Nadu and the northern state of Jammu and Kashmir.
Indian solar consultancy Headway Solar welcomed the removal of duties on panel components and plans to double the tax, or ‘cess' on Indian-mined coal to INR100/tonne a move which is expected to bring in INR6,857 crore (US$1.13 billion) in the 2014-15 fiscal year for the Clean Energy Fund (CEF), up from INR3,527 crore this year.
But Headway criticized the willingness of the Modi regime to embrace the ‘ultra mega‘ solar plant model for which it has allocated INR1,000 crore, according to the Business Standard whilst making no mention of plans to encourage distributed generation.
The consultancy added, hopes for measures to encourage banks to prioritize solar financing never materialized and, although it welcomed plans to ‘push' publicly-owned oil companies such as Bharat Petroleum and Hindustan Petroleum into investing in solar, no further details were forthcoming.
The new government has until August 22 to decide whether to follow a recommendation to impose AD duties on solar products imported from China, Taiwan, Malaysia and the U.S.
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