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Will the Sun shine on the sector?

According to reports, Arun Jaitley’s Budget is expected to have a package for the renewable power sector to address the country’s electricity woes.

With the Centre having set an ambitious target of achieving 100,000 MW of solar power capacity by 2022, the industry is expecting some announcements to incentivise the sector.

According to Bridge To India, a solar power sector consultancy firm, Power Minister Piyush Goyal had indicated that the Government is considering providing interest rate subsidies to developers who don’t claim accelerated depreciation.

“Separately, there is a proposal to consider how private developers can raise capital through green bonds. But it appears that developers’ demands for a universal tax-credit structure or waiver of minimum alternate tax for solar projects might not be approved by the Ministry of Finance,” a spokesperson for the consultancy said.

The industry has also sought better utilisation of the National Clean Energy Fund. The Independent Power Producers Association of India (IPPAI) recommends the deployment of the fund for off-grid solar power generation, funding distribution utilities that purchase more renewable energy than their obligations, and developing more washeries.

On the thermal side, there is pressure is on the Finance Ministry to remove import duty on naphtha. With nearly 16,000 MW of gas-based power plants remaining stranded for want of fuel, the industry is demanding removal of import duty on naphtha – an alternative fuel.

A proposal for offering ‘pooled’ price of natural gas to the power sector was also in the works.

However, the plan has gone back to the drawing board after the Ministry of Petroleum and Natural Gas said additional gas cannot be provided till 2016-17.

In such a scenario, the IPPAI expects naphtha to be a good alternative fuel for the gas-based plants as lower crude oil prices have brought down the cost of naphtha. The industry has also sought exemption in customs duty for coal imports and exemption of excise duty for coal. “Levy of excise duty on coal raises coal price, which in turn increases the power cost. Given the present shortages of coal, until we are self-sufficient in domestic production, coal import should be free of duty,” the IPPAI suggested.

However, it remains to be seen whether the suggestion finds favour with the Government.

Among the various tax concessions sought by the industry is a renewed demand for a 10-year tax holiday for thermal power plants based on super critical technology.

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