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Impact of Budget 2017 on the Solar Industry

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Big Day! Our finance minister Arun Jaitly announced the much awaited Budget 2017 today. Here are the key takeaways from the Budget 2017 that affect the solar industry directly or indirectly.

1. 7000 Railway Stations to go Solar in the Medium Term

This is the first time that the railway budget has been merged with the Union Budget. Mr. Jaitly announced that a proof of concept with solar power has already been done with 200 railway stations and now 7000 railway stations will be converted to solar in the medium term.

2. Second phase of solar park development to be taken up for additional 20GW capacity

As Sunkalp Energy had reported earlier, there are already over 34 solar parks currently under various stages of development across India. The Union Budget 2017 announced plans for developing more parks totaling over 20,000 MW of PV capacity. This is bound to attract further investment in this sector along with creating of jobs.

3. MNRE Gets an allocation of Rs. 5473 Crores

The budget allocated to the Ministry of New & Renewable Energy has increased by 8.6% as compared to the last financial year. This allocation will be used in activities such as subsidy disbursement and advertising among other things.

4. Components used in Manufacture of Solar Panels to get cheaper on the back of reduced customs duty

The basic customs duty on solar tempered glass (and components used for its manufacture) for use in the manufacture of solar cells/panels/modules has reduced by 5-6%. However this will have a very marginal impact on the cost of solar panels as it is a low value component and further a lot of the solar tempered glass used by domestic manufacturers is locally procured.

5. On way to achieving 100% rural electrification by 1st May 2018

Rural Electrification has been a key agenda for this NDA government. It is heartening to hear that we are on target for 100% village electrification, a small but significant percentage of which can be achieved via solar mini grids.

6. Removal of Plan and NonPlan Classification of Expenditures

Companies that undertake solar projects under state government tenders will be painfully aware that if the tender is not under Plan Classification then payments are delayed by many months. This new move may ensure that state governments complete their payment obligations in a more timely manner which will make tenders more attractive for solar companies.

7. Surplus liquidity to reduce borrowing costs and increase access to credit

The solar industry is growing at a dramatic rate of 2-3 times year on year. Given such high growth rates, most solar companies need access to credit. One of the biggest reasons for easy infrastructure growth in the West has been access to low cost debt. We hope that interest rates in India too will ease as promised in the Budget 2017 which will give a fillip to this sector’s growth.

8. For MSME companies with turnover less than 50 cr., corporate tax reduced to 25%

There are over 20,000 companies of various sizes operating in the solar sector. Most of these are MSMEs and for them a reduced corporate tax will be heartening.

So while the above mentioned points are mostly positive, they are all medium impact except for solar park development scheme. Some points requested by the solar industry via the Ministry of New & Renewable Energy were obviously missing.

Below is our wishlist for solar from Budget 2017 which remains unfulfilled:

  1. Re-introduction of 80% accelerated depreciation for solar power assets
  2. Introduction of a personal income tax rebate on the installation of a residential solar power plant
  3. Ensuring that solar panels remain in the ‘Zero list’ for import duty under GST
  4. Ensuring that Exise duty exemptions for solar equipment is sustained under GST

3 thoughts on “Impact of Budget 2017 on the Solar Industry

  1. Great information! It makes sense to “go green” for many reasons. Obviously, you’re helping the environment. But in business it’s also a competitive advantage to be seen as environmentally friendly among your target audience.

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