Bridge India

Energy goes missing from the Union Budget

The Indian Finance Minister announced budget for the financial year 2018-19 last week. Being this government’s last budget before general elections due in early 2019, the focus was unsurprisingly on populist measures related to agriculture, rural development and health. But we still found it remarkable how little attention was paid to the entire energy sector.

  • Focus is on rural electrification, but funding provision seems inadequate for various ongoing and proposed schemes;
  • Increase in customs duties on lithium-ion batteries is expected to hamper storage prospects;
  • Slippage down the government’s priority list is not a good sign for the sector;

RE received precious few mentions in the budget. Those were limited to rural electrification and solar irrigation pump schemes. But here again, the funding allocations seem too small and less than expected – INR 8,485 million for off-grid solar for FY 2018-19 is 14% lower than the revised estimate for FY 2017-18. Moreover, initiatives to devise a mechanism for DISCOMs to buy surplus power from farmers seem insincere.

For FY 2018-19, the budgeted allocation is INR 51.5 billion, 6% lower over last year. Around 39% of monies are earmarked for grid interactive solar projects. Bulk of this allocation is expected to go towards solar park capital expenditure and rooftop solar subsidies but the amount seems short of promised support under ongoing and proposed schemes.

Figure: MNRE budgetary allocation for FY 2018-19, INR million    

Picture1     Source: Union Budget 2018-19 documents, BRIDGE TO INDIA research

Note: Others include expenditure on human resource development and training, autonomous bodies under MNRE including National Institute of Solar Energy (NISE), National Institute of Wing Energy (NIWE), National Institute of Bio-Energy (NIBE) and SECI.

Despite a steep slowdown in wind energy installations during the last year, budgetary allocation for wind energy remains unchanged.

In line with other hikes in import duties, customs duty on lithium-ion batteries has been increased from 10% to 20%. That is not helpful for growth of storage business, which is already struggling with viability challenges.

Overall, it is disappointing for such a vital sector of the economy to receive such little attention. There is a dearth of new ideas and little attempt is being made to harness new technologies and business models – gasification, electric vehicles, storage, smart grids – to achieve India’s energy transition. The budget confirms our view that energy is slipping down the government’s priorities in the fog of elections and other ‘more important’ concerns.

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