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What the budget announcements mean for solar in India ?

According to reports, for the first time in history, an annual Budget of the Government has allocated as much as Rs. 1,000 crore to ‘solar’, a big signal of the new Government’s intentions. No surprise, since such a signal was expected of a government headed by Narendra Modi who, as one industry leader put it, “knows ‘solar’ very, very well”.

Few would have been arched their eyebrows at the allusion to the setting up of four ‘ultra mega solar projects’ in Finance Minister Jaitley’s speech. The proposals for the projects, with at least 500 MW each, have been so well flagged that the only surprise was why Jaitley chose to mention only four. There are many others on the anvil, for instance, at Kargil and Madhya Pradesh. Seen with the plan of six PSUs to develop a 4,000 MW solar project in Rajasthan, the intention of the Railways to get at least 500 MW from rooftop plants on its buildings, and the move to solarise agricultural pumps — the message is very clear. Jaitley has indicated the government’s seriousness, putting money where the mouth is.

Challenges ahead

In the coming days, there will be more light on how the government would meet the challenges in setting up large solar projects, like funding. Even assuming only four projects of 500 MW each come up, it would need at least Rs. 15,000 crore. Indian banks will need to be convinced to lend. Another challenge is handling large quantities of fickle solar power. If huge quantities of electricity go off the grid when, for instance, a cloud passes overhead, the grid manager will have a fit. Yet another challenge is finding money for solar power, which is still expensive.

An idea whose time has come

The Budget has also set aside Rs. 400 crore for solar-powered agricultural pumps — though the mechanism of transferring the funds to the sector is as yet unclear. Will it be given to the pump sellers, or the State Governments or the farmers directly? Jaitley has also tried to help solar equipment manufacturers by lowering customs duties on some imported inputs and abolishing excise duty. The manufacturers are awaiting formal notification of anti-dumping duties on imported finished products and the project proponents are fighting against it. Against this backdrop, some interpret the budget measures as telling the manufacturers, “here, take this, but ask for no more’.

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