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Interaction | September 2018

"Industry must not underestimate the favourable impact of GST"

RahFor Sanjeev K Ahuja, Head-Marketing, Su-Kam Power Systems, GST will minimise hassles for the vendors like the abolition of 'C' form, 'F' form and CST which added to project costs.

How significant is the current market for your product?
One of the reasons for Su-Kam's success is that we have always tried to cater to the market needs. Our technology has evolved as per the market requirement. We are one of the first in the industry to develop hybrid-grid tie technology. This system makes the best use of both, off-grid and on-grid system. Similarly, as the industry is turning towards electric vehicles and storage systems, we have already done much work in it.

The Make in India programme is a great initiative by the Indian Government. If we take a minute to look around, there are hundreds of Indians who have contributed immensely to the country's economy. So this programme is a great platform to encourage companies to manufacture their products in India. But at the end of the day, the solar companies themselves have to take the onus and work hard if they want to see success. We cannot depend on the government for everything. Take a look at the inverter industry which boomed in the 1990s because of a few entrepreneurs; the government had nothing to do in it. Similarly, the solar sector will be a success if the industry and the common man work together.

What are the upcoming opportunities for the RE sector in India?
India has a huge potential to move to a fully renewable electricity system by 2050. Under the leadership of Prime Minister Narendra Modi, India is committed towards the development of renewable energy infrastructure. The 175 GW target for 2022 and the formation of ISA led by India and France is another example of the same. Apart from solar, the country is also exploring hydropower potential in the north-eastern states which are an abode to the hydropower opportunities. The future looks bright, as nearly 293 global and domestic companies have committed to generating 266 GW of solar, wind, mini-hydel and biomass-based power in India over the next decade. The Indian power sector has an investment potential of Rs 15 trillion over the next four to five years, which indicates immense opportunities in power generation, distribution, transmission and equipment.

How has GST affected the renewable energy sector?
GST aims to overhaul India's tax system with a new unified value-added tax that is bereft of national, state and local taxes. However, GST is not free of problems. Although, GST is not imposed on electricity generated by the renewable energy, but the goods and services used in the manufacturing of renewable energy. For example, solar panels would still be taxed. Based on the report on GST by the Ministry of New and Renewable Energy, it is expected that the taxes on the procurement of goods and services would go up. Most industry experts think that this will result in a negative impact on the sector. Earlier, the solar components were exempted from the value-added tax and excise duties in most states. But now, the new solar regime imposes 5 per cent GST on the solar components. If the GST is not amended, then the cost of production of renewable energy will skyrocket.

So, it would be prudent to state that implementation of GST will not dampen the solar sector if one were to take into account the broader picture. A lower GST rate would have surely been a boon but it would not make a significant dent in the solar sector in the long run. Irrespective of new legislation coming into the picture, solar energy will continue to be among the crucial mix of India's energy roadmap, taking into account the country's ambitious target of solar power of 100 GW by 2022.

Do you think the country has benefited at larger from the RE sector and how?
Renewable energy is definitely a boon for the country. The seamless benefits that it provides cannot be overlooked. India is the fourth largest energy consumer and its energy demand will quadruple by 2030, and renewable energy is the only viable solution for India's growing energy demands. Given the push by the government, India's installed capacity for solar energy has tripled in the last three years to its current level of 12 GW. It is expected to jump by more than 100 GW over the next six years and increase further to 175 GW before 2030. Renewable energy is the key to combat climate change. The clean energy generated by it is not just environment-friendly but also available for free of cost. Renewable energy is also the perfect solution for the energy-starved nation. A significant population of India does not have access to electricity or if it does, then the grid is too unreliable; renewable energy aims to solve this problem and provide electricity to some 400 million Indians who have no access to electricity. As the price of renewable energy is declining rapidly, it is already cheaper than conventional electricity and fossil fuel. Other than that, renewable energy also comes with a lot of other economic and societal benefits. For starters, a boom in this sector has resulted in the employment for thousands of Indians.

How do you think the issue of RE financing can be solved quickly and efficiently? What are the options you suggest?
The target for renewable energy saw a surge from 23 GW of wind power and 3.5 GW of solar power in 2015 to 100 GW of wind power and 60 GW of solar power in 2022. Scaling up financing for renewable energy will be crucial as meeting these targets requires an investment of approximately USD 189 billion by 2022. In order to fill this financing gap, India has put in place several progressive policies, both at the federal and state level.

For the government, lowering of solar prices is music to the ears as this will give a boost to reach the government's renewable energy goal of 175 GW by 2022. But there are implications that the government needs to focus on. As prices fall, Indian manufacturers lose to China. The Indian solar manufacturing is growing but it is still small. About 85 per cent of solar energy equipment is imported from China and the lowering of prices has made the competition stiffer. Since domestic prices are high, imports are chosen over the Indian products. So the decline in prices is not helping the Indian manufacturers.

This is not good news for consumers, yet as solar energy constitutes a minuscule 3 per cent of our total electricity needs. Most of our energy needs are still met by non-renewable energies like coal, large-scale hydro projects, nuclear gas and diesel. It will be long before consumers see cheaper electricity bills.

Also, will this fall in numbers leave the projects at a risk?
The recent fall in prices has definitely put investors in a cautious mode. According to the solar consulting firm Bridge to India, some DISCOMs are wavering on signing PPAs for projects awarded at higher tariffs. Unless there is more clarity on this subject, there is bound to be a confusion.

Do you think the current funding scene will help India attain its renewable energy goals?
India has pledged that renewable energy will be 40 per cent of the country's expected electricity generation capacity in 2030, which includes a wind power target of 60 GW and solar power target of 100 GW by 2022. This is a significant increase from capacities existing in 2015, which are 23 GW of wind power and 3.5 GW of solar power.

Scaling up financing for renewable energy will be crucial as meeting these targets requires an investment of approximately USD 189 billion by 2022.

Banks normally look for cash-flow visibility and because of low tariffs and a lack of aggressive buying from the state distribution companies, there was a lack of visibility.

Most of the funding for green projects came from commercial financiers such as L&T Finance Holdings and the Infrastructure Development Finance Company, and not state-owned banks. Again, this is because Indian banks prefer projects that have PPAs in place.

Does Hybrid Energy Policy make sense for India? If yes, why and what are the implementation challenges?
In order to achieve the renewable energy target, the Indian Government needs to step up its game and wind-solar hybrid plants are the perfect way of achieving it. India is an ideal market for hybrid projects, experts say, given that most states are rich in both, wind and solar energy resources. So wind-solar hybrid plants will help to maximise renewables production and a very important factor in the way forward. Another reason why hybrid projects make sense in India is because it allows power producers to make better use of the land and the electricity transmission infrastructure. It is still in the early days and it will take a few years before this hybrid system can take off. There are many technical challenges as two systems have to be integrated. Another challenge is that the hybrid system requires storage technology, which is still expensive in India.


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