Modi’s 2015 Budget ‘from red tape to the red carpet’ focused on re-establishing the credibility of the Indian economy. The Government pushed forward enabling policies for clean energy, most notably the electric and hybrid vehicle landscape, with the Faster Adoption of Electric Vehicles (FAME). The 2015 Budget was large, innovative and ambitious. In comparison 2016’s ‘Farm Focused’ Budget could be said to be more cautious with a focus on strengthening the pillars on which business will need to rely, reducing contact points for corruption, and increasing transparency in the country’s tax regimes. In so doing, it also has contributed to a more robust foundation for India’s clean energy ecosystem.
India’s Finance Minister announced in 2015, that the country’s renewable energy targets would be increased to 175,000 MW. In February 2016, with India’s solar prices currently below grid parity, this target appears comfortable.
Infrastructure for renewable energy is however needed. And the Union Budget 2016 renamed India’s ‘clean energy cess’ to ‘India’s Environment Cess’, and increased it from Rs 200 (25 SEK)/tonne to Rs 400 (50 SEK)/tonne of coal. This revenue is directed towards the National Clean Energy Fund. The Fund is currently being used for renewable energy infrastructure development and clean energy transition.
Air Pollution has also been picked up by the Budget 2016, with a focus on adding taxes to private vehicles of between 1 % – 4%.
Many PPPs have been stalled due to changes in finance and due to lack of transparency. The Union Budget 2016 picked up on the Kelkar Report, led by Former Finance Secretary – Vijay Kelkar – on how to reinvigorate stressed PPPs. The Union Budget has specified that, ‘guidelines for renegotiation of PPP Concession Agreements will be issued, keeping in view the long term nature of such contracts and potential uncertainties of the real economy, without compromising transparency’. This will also play into long-term contracts being developed for infrastructure development towards renewable energy.
Perhaps the strongest points in the 2016 Budget are those that relate to developing a strong rural marketplace and agriculture. Agriculture contributes to approximately 17 per cent of the country’s GDP and covers 55 per cent of the population. These individuals have struggled to access welfare provisions. However, with a strong push from the current Government, the country’s Aadhar scheme or Unique Identification Scheme has registered over 960 million citizens, and provides a targeted mechanism for the delivery of subsidies. In September 2015, 10 small finance banks were given in-principle approval to extend banking services to small farmers and micro-industries. And in the last year, supported by the Government’s strong push on strengthening the rural buyer, 200 million bank accounts were registered. The 2016 Budget commits to 100 per cent rural electrification by 2018. The off-grid energy market will grow concurrently with this inclusion of the rural marketplace and its energy ambition.
As always the devil will be in the details, but overall India’s Union Budget 2016 has contributed towards a positive enabling environment for green energy development and demand.