Expectations: Renewable Energy / Solar Energy

Expectations: Renewable Energy / Solar Energy

Expectations: Renewable Energy / Solar Energy FICCI has highlighted the following proposals for the Renewable Energy / Solar Energy in its pre-budget memorandum.

  • The policy framework put forth by the MNRE through the National Solar Mission has accelerated the growth of the solar industry in India. However, there are some challenges for the manufacturers and developers of solar energy and associated activities in India. While MNRE is taking active steps to address the technology and on-ground risk perceptions through knowledge management and sharing, there is a need to provide fiscal measures to the Indian solar industry to enable a strong solar manufacturing base to develop in India and act as a hub for solar energy to the world.

  • The FICCI solar energy task force, representing the entire value chain of the solar industry, recommends the following points for the consideration of Government for ensuing Union Budget :

  • Removal of Inverted Duty Structure: The import duty on Solar PV Cells and Solar PV Modules is NIL, whereas the import duty on raw materials / consumables for manufacturing the Solar PV Cells and Solar PV Modules in India is levied to the tune of 10 to 15%. Certain components used for solar thermal related concentrator and collector manufacture also attract similar level of taxes and duties. This becomes an extra burden on the Indian manufacturers of SPV Cell, SPV modules and solar thermal collectors and concentrators resulting in higher cost of indigenously manufactured cells, modules and collectors, concentrators compared to the fully imported complete solar products. The import duty exemption should be removed from imported finished PV cells and modules, so as to bring Indian manufacturers at par with the global players.

  • Soft Loan for Manufacture of Silicon and Solar Cell Modules: In India, solar photovoltaic industry is at a nascent stage and needs government support. Indian Photovoltaic industry is competing with companies having base in China, Malaysia, Singapore, South Korea etc. In comparison to Indian industry companies in these countries enjoys far lower interest costs and other benefits such as low cost power, subsidized land, tax holidays etc. Solar Photovoltaic sector needs Government support to make the industry attractive to enable it to contribute towards clean energy in line with the Jawaharlal Nehru National Solar Mission objectives.

  • MNRE had earlier introduced a soft loan scheme through IREDA for setting up manufacturing facilities for poly silicon material, silicon ingots and wafers, solar cells and integrated solar cell-module plants. Presently this program is not active due to lack of government budgetary support. This scheme should be re-activated to promote raw material manufacturing in India.

  • Provide Tax Incentive in Personal Income Tax on Implementation of a Solar Energy System: Provide incentives on the Personal Income Tax payable by individuals who are implementing Solar Photovoltaic or solar thermal systems for domestic use by either procuring Solar Products such as Lanterns, Solar Water Pumps etc or implementing solar installations such as Solar Rooftop System, Solar Home Lighting etc.

  • The innovative approach for promotion such as the interest on loan amount could be exempted from personal income tax. US and Netherlands have this scheme available wherein the tax payer (individual) can either claim subsidy or tax incentive for implementing and/or purchase solar products/ installations. This would help in expanding promoting solar further in the country.

  • The use of solar energy should be made mandatory for new construction through building bye-laws.

  • Extension of Tax Holiday: The tax holiday enjoyed by infrastructure sector including solar under 80IA has ended in March 2011. As Government of India is committed to expand base of solar energy in India, it is important to restart and continue tax holiday for solar energy industry at least for a period of five years to promote solar energy manufacturing, development, EPC etc. This will bring down the tariff and cost burden to government.

  • Improving Liquidity: There is a need to improve Liquidity for solar energy sector through a solar energy fund, solar bonds, refinancing by pension/insurance funds, longer duration construction loans and making solar a priority sector.

  • Solar Bonds: Solar bonds would strengthen loan market by creating higher liquidity and mitigating risk. It would allow banks to access long tenor of dedicated funds for the sector.

  • For a bond market, a minimum rating of BBB level is required. To get suitable bond rating, government backing of bonds (structured obligations) through sovereign funds is important. Further, the solar bonds could be made tax-free to mobilize bond market.

  • Renewable Energy Sector as an Independent Sector: Considering the necessity for setting up projects on renewable energy source especially solar to meet the JNNSM targets, renewable energy should be treated a separate sector. This will enable to promote the renewable energy projects as well as establish grid parity.

  • As per the prevalent banking practice, advances to renewable energy sector are accounted in power sector exposure limits. The Power Sector Limit is already exceeding 10% of overall bank advances, which was envisaged ceiling of power sector. Further the power sector needs to grow to achieve the planned growth at an average debt funding requirement of Rs 2 Lakh Crore per year in the 12th Five Year Plan (2012-2017). The funds available for power sector will be inadequate to support RE projects included in power sector.

  • Taking into account the above consideration, there may not be enough headroom for accommodating renewable energy sector under power sector exposure ceiling norms, which will affect the debt funding of renewable energy sector. Thus this necessitates a paradigm shift of banks’ treatment of renewable energy sector as a sector different from power sector having separate exposure ceiling norms.

  • Priority Sector Lending: Solar Energy financing should be brought under priority sector lending as in the case of education and housing sector. Manufacturers, Developers, EPC and Operators working in the field of Solar Energy should be provided credit facilities at concessional/ attractive rate of interest from banks. This will attract new entrepreneurs to Renewable Energy business and help the existing stakeholders.

  • Incentivize Financial Institutions: Incentivize banks and other financial institutions to drive investments in the solar industry - both for production, as well as for end-product consumers. The solar energy projects should be given special status and banks can be incentivize to lend money for the projects.

  • Waiver of taxes on indigenously manufactured systems: As Government of India is trying to promote Solar Energy, growth of domestic industry will be very critical to meet the objectives and success of JNNSM. All forms of tax including CST, VAT & service tax etc should be waived off on the grid connected and off grid solar energy projects using indigenously manufactured system for a period of five years i.e. the entire 12th plan period. This will help in cost reduction and growth of entire value chain of the domestic industry.

  • Amendment to Section 5A of Customs Excise Act, 1944: Section 5A grants exemption from excise duty on the excisable goods from whole or any part of the duty levied. However, the provision in the section specifies that such exemption would not be applicable to excisable goods manufactured or produced in FTZ, SEZ (from a date to be notified) or by a 100% EOU. As a consequence of the above language used in the Section 5A, the Central Excise authorities are taking a stand that unless the notification issued U/s 5A granting exemption from the levy of excise duty is made applicable by specific reference to clearances from EoU to DTA, the said benefit would not be available for EoUs and the duties of custom payable with reference to Excise duty need to be discharged on clearances to DTA, despite the fact that clearances from a domestic industry are exempt by virtue of the notification. Necessary / suitable amendment should be made to the provisions of Sec 5A of CE Act, 1944, allowing the benefit to clearances from EOU to DTA, if the goods are generally exempt from whole or part of excise duty levied by omitting the proviso to Section 5A.

  • Accelerated Depreciation: The investments made in solar photovoltaic and solar thermal manufacturing should be given accelerated depreciation to claim IT benefits as given to the power plants that use the solar panels. The rates of depreciation under Income Tax Act for solar power generating systems, solar modules and flat plate collector are 80%, but there is no provision for manufacturing companies involved in solar market. 80% depreciation should be provided to the manufacturing companies and 100% depreciation benefits should be extended to companies installing large MW scale solar systems.

  • Technology Up gradation Schemes for Solar Manufacturing and the Supply Chain: A special incentive package to upgrade the facilities for substituting costly raw materials with cost effective raw materials should be introduced. This will help the industry to tide over the constant technology upgradation that is taking place in the photovoltaic and solar thermal industry and remain cost competitive and avoid obsolescence. Grants to the tune of 25% of investment should be provided to local manufacturing industry for up gradation of unit to overcome obsolescence.

  • Small Hydro

  • The government has a declared policy on Ultra Mega Power Projects wherein the entire project gets duty exemption. The same facility should be extended to small hydro projects wherein, based on a certificate issued by the concerned state nodal agency, the project should be made excise and customs duty exempt. The developer concerned can then issue certificates to the E&M supplier for duty exemption, thereby making the projects duty exempt. Since small hydro also uses a number of components which are common in nature to many other industry sectors, the provision should ensure that any component certified to be a part of the small hydro project by the E&M supplier should get the benefit of exemption. There must be ample provisions built in for any potential misuse. This exemption should apply even when the GST is rolled out. Further when the GST is rolled out, Small hydro sector should be given the status of either zero duty or only a nominal rate of GST.

First Published: Thursday, February 23, 2012, 14:24
Post Your Comment
 Your comment(s) on this article
dear sir please confimr the excise duty on solar modules if manufactured in sez and sale it to dta units
sanjay mestri - mumbai andheri
Pl let me know the Import duty on Solar lighting system from china,
Arumugam - Cennai
exemtion of central excise duty & custom duty for solar cells
The information available is good, but not sufficient, no clarity on Import Duty on Finished Solar Products, like Home lighting etc.,
Ravi.H.Heblikar - Bangalore
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