The 2021 Union Budget was one of the most keenly anticipated budgets in the history of modern India. Read-out in the backdrop of the global pandemic the budget came with high expectations. Some of the major announcements made included - allocation of Rs 35,000 Crores for manufacturing and distribution of COVID-19 vaccines, allocation of Rs 1.97 lakh crores for nurturing of global manufacturing champions to increase jobs for the youth, increase in FDI from 49% to 74% for the insurance industry and a vision to launch 7 more textile parks along with a mega-investment in textile parks within the next 3 years.
Another important announcement was the decision to break the monopoly of the DISCOMs by offering the customers a choice. The Finance Minister was quoted saying, “Distribution companies across the country are monopolies, either government or private. There is a need to provide choice to consumers by promoting competition. A framework will be put in place to give consumers options to choose from among more than one distribution firm”. INR 3.05 trillion has been sanctioned for the DISCOM reforms.
The Announcements Made for the Renewable Energy Industry
For the renewable energy industry, the sanctions announced included a grant of Rs 1500 Crores to Indian Renewable Energy Development Agency Limited (IREDA) and of Rs 1000 Crores to Solar Energy Corporation of India(SECI) for the growth of the renewable and solar energy sector in India. The announcements also included an increase in duty on solar inverters(from 5% to 20%) and solar lanterns(from 5% to 15%) for the encouragement of domestic production.
MYSUN’s Take on the Budget
Riddled with the pandemic and the subsequent lockdowns, the growth of the solar industry has seen a slowdown across both the manufacturing and installation categories. As per media reports, the solar installation category alone has seen a drop of 81%, from 1.1 GW in the first quarter of 2020 to 205 MW in the 2nd quarter of 2020.
The increase in duty for solar inverters is likely to increase the cost of solar systems. This new inclusion along with the existing safeguard duty of 14.9% on imported solar modules will make going solar more costly. Furthermore, with no clarity now on how the funds allocated to SECI is going to be used, and levying of the duty on solar batteries in a time when the domestic manufacturing industry is far from being formidable, the budget presented, though good for the overall economy, seems uncertain of bringing significant positive transformations in the solar industry.
Note: This is only an initial reaction to the budget. A more detailed analysis may be published at a later date.