Tuesday Dec 06, 2022

How increasing taxes and decreasing subsidies threaten India’s clean energy growth – Mongabay-India

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  • A recent joint study by the Council on Energy, Environment and Water and International Institute of Sustainable Development claims that subsidies for India’s renewable energy sector have decreased by 59 percent since 2017.
  • This is when the government has increased taxes on solar products such as solar panels and modules and hiked the Basic Customs Duty on imports of solar and wind energy equipment to support the domestic sector.
  • Another study claims that India needs around $30-40 billion per year for achieving India’s 2030 renewable energy target compared to the present investment of $14.5 billion per year.

After a slowdown during the first two years of the COVID-19, India’s renewable energy sector seems to be bouncing back in terms of investments. But recent studies raise doubts about the overall pace of the sector’s growth with finance emerging as a major impediment.

According to the studies, renewable energy is facing a reduction in subsidies, an increase in tax, and restrictions on the import of equipment for solar and wind energy projects. One such research is a joint study by the Council on Energy Environment and Water (CEEW) and the International Institute of Sustainable Development (IISD) which notes that, since 2017 the subsidy for the renewable energy sector has dipped by 59 percent. It also said that funding for the renewable energy projects by public financial institutions in the country was also not in coherence with the energy targets.

India aims to achieve an installation of 450 gigawatts (GW) of renewable energy capacity by 2030 to decarbonise its energy sector, while pursuing its commitment to becoming a net-zero country by 2070. Currently, India’s installed renewable energy capacity is 111.39 GW. According to the latest data, India in the last fiscal year (2021-22), added 15.5 GW of renewable energy capacity with $14.5 billion (Rs. 11,338.8 crore) investment pouring into the sector.

The CEEW study ‘Mapping India’s Energy Policy 2022’ claimed that, in 2017, the subsidy for the renewable energy sector stood at Rs.16,312 crores (Rs 163.12 billion) but in the last fiscal (2021-22) it went down to Rs. 6,767 crores (Rs. 67.67 billion). However, during the same period, the subsidies for electric vehicles almost tripled. The report emphasised that the major support for clean energy projects in the country was through the Non-Banking Financing Companies (NBFCs) and selected private banks while the investments of public sector lenders were more towards the fossil-fuel-based energy projects.

Experts who co-authored the study, claimed that such a scenario could hurt the country’s pace if it wants to achieve the 2030 target. They called for more subsidies and efforts to clear the finance-related bottlenecks and other hurdles.

Rooftop solar panels installed over MG Bus stand, Telangana. The Indian government has increased taxes on imported solar and wind equipment. Photo by Manish Kumar/Mongabay.

“More subsidy support will be needed to scale up solar manufacturing, green hydrogen, and promising decentralised renewable energy technologies. To manage the intermittency of the sector and the grid integration aspect, the supporting ecosystem including storage and transmission would also need government support and additional investment,” Prateek Aggarwal, Programme Associate at CEEW and a co-author of the study, told Mongabay-India.

He said the sector would need more investments from different financial institutions, as the situation demands large-scale mobilisation of capital through debt instruments. In terms of volumes, CEEW’s study estimated that $200 billion (Rs.15,632 billion) would be needed to set up the generation capacity alone whereas the combined current exposure of banks and the NBFCs to the entire Indian power sector stands …….

Source: https://india.mongabay.com/2022/06/how-increasing-taxes-and-decreasing-subsidies-threaten-indias-clean-energy-growth/

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