Indian Union Budget 2021-22: Budget 2021 will be of considerable significance to the energy sector even if it is viewed only from the viewpoint of the setback received by this sector due to the outbreak of COVID-19. During this pandemic period, the Government known as for the nation and its citizens to be ‘independent and self-reliant in all senses’ even though introducing the Atmanirbhar Bharat Abhiyaan. One of the 5 pillars of the Atmanirbhar Bharat Abhiyaan is Infrastructure and needless to state that energy sector is an integral and essential component of it. The stimulus packages announced by the Government throughout the pandemic has attempted to give strength to the energy sector, even so, are largely regarded as as getting unable to attain the preferred final results.
Therefore, Budget 2021 need to give concrete measures / relief to the energy sector as the targeted government spending will give a booster shot to the sector. The essential places of concern are distribution and renewable power generation projects.
Distribution of electrical energy is the most crippled segment in the energy sector. It is effectively identified that most of the distribution corporations (Discoms) are financially unviable and the pandemic has only worsened their predicament. As per the PRAAPTI (Payment Ratification And Analysis in Power procurement for bringing Transparency in Invoicing of generators) site, at the finish of November, 2020, the outstanding quantity payable by the Discoms to producing corporations stood at INR 1,30,690 Crores which and seems to have elevated by about 30%-35% from August 2019. The delays in payment have an influence not only on the Discoms themselves, but also the producing corporations, railways, coal suppliers, the customers of the Discoms and public at huge. The non-payment by Discoms, amongst other effects, creates working capital shortfall for producing corporations top to quite a few issued like inability to service debt which has cascading effects like lowering of credit ratings, and charging of larger prices of interest and penal interest.
A associated problem right here is that the Government is also thinking of the privatization of the Discoms and has commenced the approach for the similar in specific Union Territories. With such huge monetary liabilities, weakening distribution infrastructure and waning monetary overall health of the Discoms, this aim of privatization will be severely impaired as these liabilities can not be passed on to the private players. Accordingly, the Budget ought to allocate an quantity for absorbing, or scheme to address, such liabilities just before the approach of privatization is commenced for the distribution corporations. Even if the privatization approach is not regarded as, these incentives are essential to revive the overall health of the Discoms. While the Government is undertaking policy measures and also proposed amendments to the Electricity Act, 2003 to address challenges affecting the Discoms, the Budget 2021 ought to provide relief essential even though maintaining lengthy term interests in thoughts.
The renewable power sector also wants consideration in the Budget 2021. The replacement of the safeguard duty on the import of solar cells is getting regarded as to be replaced with the imposition of the standard customs duty on the import of solar cell. While the Government could contemplate the requirement of these tariff barriers to market the manufacturing of modules in the nation as a component of the Atmanirbhar Bharat Abhiyaan, it ought to also provide some offerings for the improvement of the module manufacturing capacity. In December, 2019, Solar Energy Corporation of India concluded the solar projects bid linked with module manufacturing capacity. Through this bid, 3 GW of module manufacturing capacity was to be created. However, projects have not but taken off due to the larger tariff found in such bids and lack of appropriate help from the Government. To be self reliant, the Government can not ignore the dangers involved in module manufacturing along with low costs of imported modules and need to contemplate subsidizing tariffs or such related direct help if it desires to seriously create the module manufacturing capacity.
Further, as the information suggests that there is a pipeline of about 35 GW of renewable energy generation projects requiring about INR 1.75 lakh crore of investment, the Government can contemplate delivering revolutionary green finance goods along with concessional prices of financing for this capacity.
With the vaccination drive in progress in the nation which will certainly lead the industrial and industrial activity towards normalcy, hopefully the Budget 2021 will provide the suitable incentives and make proper allocations for spending in the energy sector to propel the economy when once again to a healthier development price.
(Shashwat Kumar is Partner, Shardul Amarchand Mangaldas & Co. Views expressed are the author’s personal.)