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While Indian industry has varied opinions on the Union Budget 2020, there is a general sense of optimism regarding the government's continued focus on transitioning to a renewable energy-driven economy. As part of India’s commitments under the Paris Agreement, the country aims to generate 40% of its total energy from non-fossil sources by 2030. By 2019, it had already achieved 17% of its energy needs from renewables, with an installed capacity of 35%. This progress reflects a strong foundation for future growth.
The budget allocated a 10.35% increase to the Ministry of New and Renewable Energy (MNRE), marking a cumulative 10% rise over the past three years since 2017-2018. This sustained investment highlights the government’s long-term commitment to clean energy and sustainability.
Beyond the numbers, the budget emphasizes a holistic approach that aligns with global environmental goals. Several key initiatives are outlined below, each aiming to accelerate the shift toward a cleaner, more sustainable energy landscape.
**Kisan Urja Suraksha Evam Utthaan Mahaabhiyaan (KUSUM)**
Launched in 2018, KUSUM was designed to install 17.5 lakh solar-powered irrigation pumps in areas without grid access, alongside 10 lakh pumps where electricity is available. This initiative not only promotes cleaner energy use but also boosts farmers’ income by allowing them to sell surplus power back to the grid. The scheme also reduces the cost of rural electrification through decentralized power generation.
In this year’s budget, the target has been increased to 35 lakh pumps, with a funding allocation of 700 crores for expansion and another 300 crores for using barren land for solar power generation. The goal is to produce 4 GW of power through these efforts. If implemented effectively, this could provide additional income to farmers while making better use of unused rural land. However, challenges such as groundwater overuse must be carefully managed.
India currently has around 3 crore diesel or electric irrigation pumps, contributing significantly to fossil fuel imports and environmental degradation. Shifting to decentralized solar power offers a promising path toward achieving the 2030 climate targets while offering economic benefits to farmers.
**Encouraging Railways to Generate Solar Power**
The budget has set a target of 18–20 GW of solar power generation by railways. This includes both solar panels along railway tracks and rooftop installations at stations and yards. A pilot project in Bina, Madhya Pradesh, in collaboration with BHEL, is expected to become operational by March 2020. With a capacity of 1.7 MW, it will supply 25 lakh units annually to the railway grid, helping reduce dependence on conventional energy sources.
**Corporate Tax Reduction**
To encourage investment in new and renewable energy projects, the 15% tax rate for new manufacturing units has been extended to renewable energy facilities. This move is expected to attract more private sector participation and boost the growth of the clean energy sector.
**Dividend Distribution Tax Abolition**
Previously, foreign investors faced challenges due to the taxation of dividends from renewable energy projects. The abolition of Dividend Distribution Tax (DDT) in this budget is a significant step toward attracting more international capital into the sector.
**Smart Metering Initiative**
The budget also introduces a smart metering program aimed at reducing financial strain on power distribution companies (DISCOMS). These meters operate similarly to mobile phone SIMs, requiring users to prepay for energy. This allows consumers to switch providers and pay based on time-of-day tariffs. The goal is to transition all households to smart meters within three years. While the concept is innovative, the high cost of each meter—around 3,000 INR—raises questions about how the funding will be secured, especially in remote areas.
Overall, the Union Budget 2020 signals a strong and forward-looking strategy for India’s renewable energy sector. With continued policy support and strategic investments, the country is well-positioned to meet its climate goals and drive sustainable development. The sun is indeed shining on the solar sector.