[BUDGET I REACTIONS]

POLICYMAKERS b INDUSTRY REACTION TO

THE BUDGET 2018-19 Sabyasachi Majumdar Senior VP and Group Head- Corporate ratings, ICRA Limited

Thrust towards solar energy, in line with policy focus to support capacity addition

With a strong policy focus on renewable energy by Government of India (Gol) as demonstrated through National Solar Mission so far, the Budget 2018 shows a thrust as seen from the proposed measures which should facilitate the solar capacity addition. Budget has outlined the proposed mechanism to buy surplus solar energy from agriculture solar pumps by the distribution utilities at a reasonable price. Moreover, the budget has given a push for deployment of solar energy under smart city programme. Also, the higher capex proposed by railways (including for capacity creation & electrification of network) would also lead to demand for deployment of solar energy for meeting its energy requirements. Besides such policy support, an improved tariff competitiveness of solar energy also remains a critical factor which should support the capacity addition in a sustainable manner, given the sharp drop in PV module price levels internationally over the last 2-3 year period.

The budget has also announced measures to facilitate the access to bond market for meeting 25 percent of debt needs by large corporate which will allow the entities in power & renewables to diversify the funding sources at cost competitive rate, given the highly capital intensive nature of sector &

large funding requirements. Especially in renewable sector, the ability to ensure the long term debt funding at cost competitive rate remains critical for the developers/ IPPs, given the single part & fixed nature of competitively bid tariff in the PPAs which are mostly long tenure. Further, the reduction in tax rate to 25% for entities with turnover of Rs. 250 crore is a positive for renewable IPPs, given that a majority of them have capacities of less than 200 MW and thus revenues within the prescribed limit.

Given the push for Make in India so as to encourage the domestic manufacturing, budget has highlighted the import duty reduction from 5 percent to nil on solar tempered glass which would thus result into a marginal reduction in module cost & hence, would be positive for domestic solar PV module manufacturers. The budget has also provided allocation towards funding requirements in the wind sector (particularly for GBI benefit) as well as part-funding requirements under the green energy corridor which is critical for strengthening of network for evacuation of green energy in RE rich states.

Nonetheless, the uncertainty over imposition of duties (import duty / safeguard duty / anti­dumping duty) including timelines & quantum thereof continues for the solar energy sector. On import duty front, solar modules have been subject to 7.5 percent import duty at port authorities under the customs classification of electric generating system and in turn, modules have been released by port authorities to the IPP/ developers under provisional release against the bank guarantee, based on Industry sources. Further, the Directorate General of Safeguard

Duty has recently recommended the provisional safeguard duty of 70% on import of the solar modules/cells, which is yet to be finalized. In this context, clarity is required on the applicable duties for solar cells/modules, given the large sized bidding pipeline announced by Ministry of New & Renewable Energy (MNRE), Gol so as to meet the cumulative capacity targets under NSM by FY 2021-22.

Further from power sector perspective, budget shows a thrust towards ensuring electricity access (24x7) to all rural households as seen from schemes like "Saubhagya & DUGJY" which in turn is likely to provide a boost in energy demand to some extent, apart from improving the quality of life for rural households.

Renewable Energy: Proposals • Mechanism proposed to buy surplus solar energy from solar pumps by the discoms at reasonable price • Increased capex by Railways particularly for electrification & augmentation of line network • Allocation of Rs. 4200 crore for capacity addition in wind power, solar power and green energy corridor • Measures proposed to facilitate the access to bond market for meeting the 25% of debt needs by large corporates, including those rated in "A" category. • Reduction in corporate tax rate to 25% for entities with turnover of upto Rs. 250 crore

[BUDGET]

Sambitosh Mahapatra, Partner, PWC

discoms told to purchase solar power from farmers' State discoms have been told to purchase solar power from farmers. It can provide an income stream to farmers if they install solar pumps. The hydro and gas are stressed and it should have been addressed, while distribution reforms pending. Regulatory capacity enhancement could have happened.

Tulsi Tanti, Chairman and Managing Director, Suzlon Energy

'Budget gives impetus to MSME's - the backbone for the wind energy' The budget has given significant impetus to MSMEs who are the backbone for the wind energy sector of India, as they manufacture components and provide various services. Reduction of corporate tax for MSME's will help them to reinvest the surplus capital in establishing newer units to meet the overall target of 175 GW renewables by 2022. Also, governments initiative to recapitalize PSU banks, enables the banks to provide loans to MSME's. However, I am hopeful the finance minister will consider the following to enable Nations Energy Security, sustainable and affordable power for all: • Reinstate Accelerated Depreciation to the tune of 80% to small domestic investors with project size less than 25 MW, till at least FY 2022 to enable the 175 GW RE target. This will also benefit Central Public Sector Enterprises (CPSEs) and will also give impetus to the governments Make in India vision • Prov ide 50 paise/kWh as incentive to Performance Based Incentive (PBI) to state DISCOMs for procuring RE based on FiT for small projects of 25 MW • Export incentive td achieve manufacturing target of 10,000 MW+ per annum, by increasing export incentive from 2% to 5%, to make Indian exports competitive in the global market. Overall, the measures on the economic reforms, ease of doing business and impetus for the social sector are steps in the right direction for the growth of Indian economy in the long-term.

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Manish Aggarwal, Partner and Head- Corporate Finance - M&A, Debt Advisory - Infrastructure Head - Energy and Natural Resources, KPMG India

'Facilitation of farmers to set up distributed solar projects holds a greater promise' A cornerstone of th e Budget 2018 i s to further the access to energy agenda to the marginal section of the population. Enhancement of the 'Ujwala' scheme to provide free LPG gas connections to 80 million women, reiteration of commitment under 'Saubhagya' scheme to electrify 40 million h ouseholds and facilitation of farmers to set up distributed solar projects holds a greater promise for the currently unserved energy consumers. These schemes hold a potential to enhance energy demand greatly and thus may help bring the stra nded capacity on-line. Access to financial markets for energy sector companies is likely to be kick-started by facilitating investment by long term savings based institu tional investors through measures announced for kick starting the bond markets in India. Smaller companies particularly in distributed energy space with turnover below INR 250 Crore will benefit by a lower tax rate. Mention of CPSE Inv ITs increase the hopes of power sector PSUs being able to access market to raise equity capital in innovative manner."

REACTIONS

Hitesh Doshi, Chairman b Managing Director, Waaree Group

'Budget 2018 is extremely balanced' The Union Budget 2018 has been extremely balanced, and restored our belief in the Government for ensuring continuous growth of Indian manufacturing sector. Coupled with the sentiments on the provisions for boosting solar presence in the country, we are moving towards an expedited growth in the renewable energy sector, especially for domestic manufacturers. We are looking forward to play a role in helping the country move towards a sustainable future of renewable energy security. Especially, with the smart city initiative embracing rooftop solar, we at Waaree Energies are ready to deliver.

We are also looking forward to help the Government fulfil its ambitious goal of providing free electricity to 4 crore rural households, in addition to creating more employment opportunities as part of the Indian manufacturing sector. We also applaud the Government for acknowledging the role of MSMEs with the announcement of the reduced rate of 25% for companies with a turnover of up to INR 250 crore in 2016 - 2017. We hope it results in increase of skill development and adaptation of new technologies and innovations across industries.

The elimination of customs duty on solar tempered glass, manufacturing solar panels will become relatively cheaper. Further, financial support and renewed investor interest in the solar manufacturing sector would be welcome, as it will help boost the manufacturing and value chain in the country, and in turn help with the energy security. It would also play a major role in reduction of any trade balance gap that might exist between India and other countries.

'Govt could have focused on incentives to increase private sector investments in key sectors' Transitioning to renewable sources of energy has been an area the government has focused on in the past and is resolute on, for the future. The sector was hoping for greater clarity - particularly with regard to anti-dumping and safeguards duties, in view of meeting the 175 GW target set by the Prime Minister. It is still heartening to note that a mechanism is being created to procure and wheel surplus solar power from the agriculture sector for supply to the grid. This, coupled with an increased public investment of Rs 16,000 crore in the Saubhagya scheme to electrify 4 crore homes, are laudable steps.

Overall, the government has done its best to address the interests of both the common man and business. However, some additional focus and incentives on increasing private sector investments in key sectors would have gone a long way to ensure a healthier growth trajectory for the economy.

Dr. Ashok Haldia, MD b CEO, PFS (PTC India Financial Services Ltd)

'Great positive for infrastructure sector' The Budget rightiy focuses on the rural and infrastructure growth, which are the backbone of Indian economy. 50 percent higher spend on the infrastructure sector will reboot the demand -economic wide, and create jobs through multiplier effect that is a big concern for everyone. This would as well raise demand for funds and funding opportunities for

existing projects under stress or stalled or under implementation and new projects. We can expect increase in the demand of finance and fund raising opportunities. Permitting investment in 'A' rated bonds would boost fund raising options particularly for inf rastructure projects . Focus on schemes, such Saubhagya Yojna for Power for All coupled with impetus on rural spending all together would generate electricity demand. Installation of rooftop solar under smart city projects would further boost achievement of 175 GW renewable energy mission. Overall, the Budget is inclusive in nature and shot in arm for infrastructure

Gyanesh Chaudhary, MD and CEO, Vikram Solar

"This years budget is in line with expectations, with a focus on all sectors and strata of society. The Governments Budget of 2018-19 aligns with the overall plan of reducing the corporate tax rate gradually. The corporate tax reduction from 30% to 25% for businesses with revenue up to 250 crore is definitely a positive move towards a lower tax regime. E-assessment of income / Corporate tax is very significant structural reform as proposed, and will reduce human interference, with long term benefits in ease of doing business.

Taxation of long term capital gains at 10% was expected, and the fact of it not being implemented retrospectively is definitely a thoughtful move. There seems to be no change in customs duty on solar panels, which is good news for developers like CleanMax Solar and for the growth of the solar industry in India."

'Budget has limited

allocation to MNRE with a target to

achieve 11GW' Budget 2018-19 is not very encouraging for the renewable and solar energy sector. The government has missed out on a major opportunity to take a lead towards combating climate change. The recently released Economic Survey highlights the impact of climate change in India especially to farmers. It mentions that rainfall extremities have increased in the past 10 years and climate change can potentially reduce farmers income by the range of20-25%. Renewable Energy, especially solar can play a very crucial role to reduce the impact of climate change on our communities.

Unfortunately budget has not taken steps to create an eco-system which would make combating climate change a possibility. The budget has very limited allocation to MNRE with a target to achieve 11 G W of installations in the next financial year. Allocation to SECI has also seen a reduction. A large chunk of the coal cess which was earlier transferred to National Clean Energy Fund now goes towards GST compensation fund. The budget does not talk about any alternative mechanism which would fund clean energy installations in India. In terms of energy security, currently we import 85-90% of our solar modules, which threatens our energy security. The current provisions in the budget do not mention any support for the manufacturing industry which has been highly discouraging for the sector. We hope that government will take additional steps to increase installations of solar power plants by providing direct and indirect support.

'No change in customs duty on solar panels is a good news for developers'

Kunwer Sachdev, Managing Director, Su-Kam

'Announcement of 20 GW of solar power

capacity in railways will go a long way in

the adoption of solar energy'

"The announcement of establishing 20 GW of solar power capacity and feeding 7,000 railway stations with solar power will go a long way in the adoption of solar energy. Mea sures such as lower corporate rate for small enterprises, the increased turnover limit under Presumptive taxation scheme under section 44AD of the Income Tax Act for assessees in MSME category will create an enabling ecosystem for startups in the renewable energy category'

Hartek Singh, CMD, Hartek Group

'Need of Smart Grids to increase' Hartek Group, with its power sector expertise, is well placed to support

railway electrification and modernisation for which Government of India has announced CAPEX allocation of Rs 1.48 lakh crore. With an expertise in providing complete EPC solutions, we are positive towards finding opportunities in this domain and being an active part of the country's growth story this year. Also, with 99 cities selected and an outlay of Rs 2.04 lakh crore allocated under the Smart City Mission, requirement of Smart Grids will increase as these are essential to support seamless power infrastructure for different Smart City functions. Hartek Group looks forward to playing an important role in realisation of the this mission.

Vikram Kailas, Mytrah Energy

'Social sector initiatives will benefit from increased allocation to schemes like DUG JY and Saubhagya' Insofar as renewable power is concerned, the social sector initiatives will benefit from increased allocation to schemes like DUGJY and Saubhagya. This will provide further impetus to efforts to provide rural households easier access to clean, reliable power. Likewise, the increase in the revenue ceiling for reduced corporate tax rates should benefit the smaller manufacturers. However, the continuing uncertainty over the various duties imposed on solar components will be a drag, especially for larger scale projects."

Anmol Singh Jaggi, Director, Gensol Group

'Smart city mission to give a major boost to the clean energy sector'

With a thrust on smart cities and identification of 99 cities under the ambitious Smart city mission will give a major boost to the clean energy sector as Smart Cities have a large component of Renewable Energy.

Smart Cities Mission aims at building 100 smart cities with state-of- the-art amenities that incorporates renewable and natural resources with great emphasis. It is a clear indication that the focus on green energy' is one of the top priorities of the government It will also boost the solar rooftop industry.

These cities will be enabled by various projects like Smart Command and Control Centre, Smart Roads, Solar Rooftops, Intelligent Transport Systems, Smart Parks. Projects worth * 2350 crore have been completed and works ofv 20,852 crore are under progress. We expect will create a platform for the Supervisory control and data acquisition (SCADA) industry as well.

With the aim - 'Power for All,' the government is determined to not leave any stone unturned in its target of meeting 100% electrification by 2018 as in the budget, it has been announced that there will be an increase of 35% of expenditure allocation to rural electrification schemes.

We are happy that government has highlighted the benefits and advantages of solar-generated power and has acknowledged its practicality. The budget has announced the second phase of solar development of another 20,000 MW that will surely prove to be a major push for India to be one of the leaders in the global solar industry.

Besides their commercial and individual uses, solar power has also been beneficial to Indian Railways as well as the peripheral railway infrastructure will be solarised. In the rural areas too, farmers are switching to use of solar power for pumping and irrigation purposes. In the Budget, Government has also taken appropriate measures to encourage the initiative and has announced that the State Governments will formulate a mechanism where the distribution companies or licensees will purchase the farmers surplus solar power at reasonable remunerative rate.

Even though there has been a 6 per cent excise duty on solar tempered glass has been proposed, the basic customs duty on solar tempered glass for use in the manufacture of solar cells, panels and modules has been proposed to be eliminated.

from the 'Sun' . It is disappointing to see that next

Gagan Vermani, Founder b CEO, MYSUN

'The budget will help India achieve higher GDP forecasts for next year' The election year' has taken the shine away

the solar energy sector has been ignored in this year's budget. It wa s much awaited that the Finance Minister would clear the government's view on customs duty on solar cells and modules, but that has not materialized. Overall, with its overriding focus on farmers, the budget is expected to give a boos t to rural consumption which in turn will help India achieve its much higher GDP forecasts for the

year.

Shekhar Singal, MD, Eastman Auto b Power Ltd

'Budget will promote clean energy, access to power and energy security' We welcome the budget! It is a people focus budget With the announcement of promoting electric vehicles, centre may lower GST and pass benefits to buyers, will give a major impetus to the shift to clean energy.

However, in the renewable energy sector there are number of policy decisions related to import duties and domestic manufacturing, which needed to be addressed to further boost the sector. Also, achieving the target of 175 GW of renewable energy capacity and generating it by 2022 requires a lot more to be done than simply increasing the budgetary allocation.

Dibyanshu, Partner, Khaitan b Co.

K N Subramaniam, Member of General Council, Indian Solar Manufacturers' Association (ISMA)

'Saubhagya will be truly transformational'

'Saubhagya is one of the Powerful tools which was in top of the Agenda and PM Modi launched the program in September 2017, to deliver 24*7 Power to 40 mill Rural and Urban Poor by December. In this budget there is an allocation of Rs 16400 cr for Saubhagya to ensure 'Sahaj Bijli Har Ghar Yojana ' to those who have not seen benefits of Power. Saubhagya will be truly transformational and benefits of economic growth will touch the bottom of the pyramid in terms of population

The earlier Scheme DUGJY (Deendayal Upadhyay Gram Jyothi Yojana) was to ensure power reaches every village and current Scheme takes the next step of connecting Households

The Budget has done another path breaking change for farmers in terms of buying excess power generated from solar pumps, by Discoms or Licensees at a reasonably remunerative price. This will certainly promote solar pump usage in farms and also give a fillip to manufacturing sector who will supply the sole Pump solutions Solar Installations have reached 20000 mw + in Dec 2017, four years ahead of targeted year of 2022 as per Jawaharlal Nehru National Solar Mission 2010 ( J NNSM). Now, is the time to promote aggressively Domestic Manufacturing, though it may lead to a small increase in solar tariffs, but in the long run provide self-sufficiency and energy-security.

'Overall a good budget but no specific mention of wind energy' It is a good budget for Sectors of Rural, Agriculture, Education and Healthcare. MSME Sector gets relief on Corporate Tax. How ever, there is no specific mention for Renewable or Wind Energy. Our Pre Budget Memorandum submitted has not been addressed.

The Finance Minister has announced in the budget that the Government of India will take necessary measures and encourage State Governments to put in place a mechanism that the surplus solar power generated by farmers is purchased by the distribution companies or licencees at reasonably remunerative rates. The move is a welcome step in trying to encourage self-reliance and productivity of rural households and at the same time providing impetus to solar rooftop targets and achieve the renewable energy targets. It will be important to see how this scheme is operationalised by the Govt.

The budget provides impetus to solar rooftop targets for achieving the RE targets'

D.V.Giri, Secretary General, Indian Wind Turbine Manufacturers Association

Energy Storage and microgrids to play a vital role in Smart Cities

Rahul Walawalkar, Executive Director, India Energy Storage Alliance (IESA)

Honourable Finance minister has made a welcomed move by stressing on building a strong infrastructure both for Roadways, Railways and Smart Cities which we are sure will include Electric Transportation and optimal electrification of the railways. As part of the Smart Cities, Energy Storage and microgrids will play a vital role. Improving power quality and reliability is the backbone for effective implementation. This will be a big push for IESA member companies.

Govt, increased the allocation money under FAME scheme but its non-ambitious goals of 100% EV s by 2030 is minimal. We are looking forward for the National Energy Storage mission which should lay out more specifics about EV's. This is a good start, but we expect lot more clarity & initiatives from the Govt for 100% electrification targets.

Jaideep Malaviya, Secretary General Solar Thermal Federation of India (STFI)

'Feeding excess power from solar irrigation pump sets is a market driver for solar energy business'

It was expected to announce measures to protect domestic solar water heating industry with a higher import duty announcement but it did not happen. The 10% social tax on imported goods will benefit the government rather than encou rage 'Make in India. The shining ray, however, was the doubling of allotment for food processing industry & process heating can find business for solar thermal markets with more industries coming up. Feeding excess power from solar irrigation pump sets is a market driver for solar energy business but it need s to be seen how electric utilites give anticipation.

iSST Raju Kumar, Tax Partner, EY India

Budget offers a step in the right direction for RE sector

rVi I proposed focusing on the renewab le [•_ 1E|^ energy such as Galvanizing Organic Bio-

Agro Resources Dhan (GOBAR-DHAN) for management and conversion of cattle dung and solid waste in farms to compost, fertilizer, bio-gas and bio-CNG.

Further, considering that the cost of renewable energy is largely a function of initial investment cost, there need to be more incentives for capital subsidies and tax holidays encouraging more investment on a larger scale in such facilities across nation. The fact that the government has proposed to launch schemes like "Prime Minister Saubhagya Yojana" (targeting to provide four crore poor households with electricity connection) or "Ujjwala Yojana" (to provide free LPG connections to the poor of this country) indicates a large reliance on the energy sector in the near future.

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Ashish Khanna, ED b CEO, Tata Power Solar

Innovation of combining solar energy for power needs will be a paradigm shift In this budget, Finance Minister has announced an innovative scheme which will accelerate

solar water pumps installations by farmers. The government will be taking necessary measures to encourage distribution companies to purchase excess solar power generated by the farmers while harvesting the suns energy for the solar pumps. This innovation of combining the usage of solar energy for power needs as well as a source of earnings will be a paradigm shift in the manner solar energy is utilized by majority of farmers in this country.

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