Indian Union Budget 2016-17 & Solar Industry — March 9, 2016

Indian Union Budget 2016-17 & Solar Industry

Author: Kapiel Dongle, Business Head at Fourth Partner Energy Pvt. Ltd

All in all, the budget did not bring any ‘Wow’ moments for our industry. However, subtly, it did indicate that incentives for solar will slowly be withdrawn while grid prices continue to rise.

Limited Accelerated Depreciation:

From April 2017, Accelerated Depreciation will be limited to a maximum of 40% which currently stands at 80%. Claiming Accelerated Depreciation for tax saving purposes was a huge incentive for industrial and commercial consumers to go solar. Although, solar already makes commercial sense, April 2016- 17 will see a massive capacity additions in order to use this incentive while it’s available. If prices don’t fall at rate which ‘compensates’ for the use of A.D in one year, then uptake of solar is expected to slow in the financial year 2017-18.

Increasing the Clean Energy Cess or the Clean Environment Cess:

The cess on coal, lignite and peat has yet again doubled from INR 200/ tonne to INR 400/ tonne. The previous financial year it was doubled to INR 200/ tonne from INR 100/ tonne. This would mean an increase in funds available for ‘Renewable Energy’ of which ‘Solar’ forms a large part. This means all those eligible for subsidy in Solar PV can be a little more confident about receiving it after the project is done. If we look beyond the funds, the increase in the cess will also shoot current power tariffs . This would incentivise consumers at least in Metropolitan cities of Dehi, Mumbai and Kolkata to consider going solar which has an LCOE lesser than their current tariffs.