banner-image

Demonetization of INR 500 and 1000 rupee notes: Impact on the Solar Industry

Share on Facebook0Tweet about this on TwitterShare on Google+0Share on LinkedIn38

Yesterday at 8:30 PM, we all were witness to a very big move made by the Modi government to tackle the problem of undeclared income, demonetizing INR 500 and INR 1000 rupee notes. All the citizens have been asked to exchange their existing such notes from the banks for new ones (refer). This is a huge move which was kept absolutely secret from the public until 8:30 PM yesterday and has been implemented from today at 12 AM.

I’m sure those with black money have been left stumped & have had a sleepless night and will have more ahead. In my opinion, this demonetisation has been an extremely bold and revolutionary move to tackle those with black money with partnerships also made with other countries to track people who transfer money in their banks abroad. Here’s a document (refer) released by the government which briefs out the move and lists places where INR 500 and 1000 rupee notes will be accepted.

But, let’s now have a brief look at the kind of an impact this will have in the Solar Industry.

New 500 & 1000 Rupee Notes May Reduce Corruption and Expedite Approvals for Solar

The move is set to have a long term benefit in the industry in terms of all the liaising work involved in Solar Projects which includes subsidy applications and net-metering applications. In Sunkalp’s past experience, submission of subsidy applications has been accompanied with officials from the disbursing agencies asking for bribe to complete the procedure.

With abolishment of the current notes and disbursements of new notes which contain NGC (Nano GPS Chips) (see image below), it’s easy to track concentration of money at any location.

It’s not been clarified yet, where this chip would be placed on note. But, officials will be wary while asking for a bribe limiting the amount demanded. I would not say corruption would get eradicated completely, however, the amount demanded/ slyly asked for in bribe will be reduced substantially preventing black money accumulation.

Edit: It has since been confirmed that the new notes in circulation do not have a nano-chip. Yet to be seen if this was just a rumour or whether this will be introduced in the future.

500-and-2000-rupee-notes

We hope this makes both the net-metering and subsidy application process clean ones with lesser roadblocks.

More Organizations May Opt for Solar to Utilize Beneficial Accelerated Depreciation

Also, I feel this move would have a huge indirect effect of using solar as a tax saving tool (for all the income that’s declared until 31st March 2017) by using accelerated depreciation. Again, an indirect push to channelizing large sums of money on big projects (which would allow massive tax savings) which might be a contributor in achieving the 100 GW solar target.

We are yet to see what happens on ground and how it would have a positive impact on the Solar Industry if at all it has to.

Tanya Batra

Tanya keeps a close track of policy updates in the field of Rooftop Solar in India and likes to write blogs on its application for the end customer

7 thoughts on “Demonetization of INR 500 and 1000 rupee notes: Impact on the Solar Industry

  1. CAPEX will increase as many developers who had black money were showing less Capex and we’re spending black money on civil works or such unaccounted works including paying bribes to get VGF, getting connection for evacuation, drawing the transmission lines thru black money. By showing less capex and tax evasion thru accelerated depreciation, they were able to higher IRR and getting the Loan sanctioned. Now, with higher and transparent Capex, low tariff will not be viable as IRR will get reduced…..The PE money thru Maritius / Licestire or such tax heaven route will increase to show low cost of capital as the Indian bank debt interest will call for higher IRR…..what is your company view on this Black money play in the Project development esp REC based projects of the PAST….same is applicable to RESCO model of Roof top PV projects…

    1. Dear Praveen,

      Speaking for roof-tops, the component of the civil works is barely 5-7% of the total project cost. Hence we don’t think much black money was being used in this area.

  2. I think you have a point about bribery but when it comes to people , they are thinking about money for food and basic amenities. Solar is not top priority for many nowz Overall purchasing power of people will decline.

  3. This is undoubtedly good move indeed. However bureaucracy can play a villain. For processing your applications/petitions they can sit on these demanding speed money which give an opportunity to budget for black money. This is another important issue that need to be addressed by our PM and make it a deemed approval if an application/petitions are not approved by a set date. Can he do this like in some developed countries???

    1. We couldn’t agree with you more Eswar. I believe the automatic approval is already a mandate with several organizations like Municipal Corporations, however, bureaucrats find a way around that by raising concerns on the last day before the set date- and in this way they can cause indefinite postponement of approvals.

Leave a Reply

Your email address will not be published. Required fields are marked *