Budget 2022: What the industry expects

The Union Budget for 2022-23 is scheduled to be presented in Parliament by Union finance minister Ms Nirmala Sitharaman, on February 1, 2022. The corporate sector, industry bodies and think-tanks are universally expecting that the Budget will spur overall economic growth, especially in the wake of concerns caused by the pandemic that broke out in early 2020. Here is a collection of what leaders in the power and electrical equipment industry are expecting from the Budget.

 

PPP model should be encouraged

Amidst the ongoing third wave of the pandemic, the upcoming Union Budget 2022-23 is expected to play a pivotal role in countering inflation and galvanizing demand, especially for private consumption. The long-term intent of the Government towards the infrastructure sector with the committed investments and special focus on manufacturing will get further highlighted and accelerated through the Production Linked Incentive (PLI) schemes. This is a significant step towards making India a global manufacturing hub. There is thus a need for incentivizing modernization and innovation so that the industry across the infrastructure, manufacturing and agricultural sectors will have the scope to be more competitive and gain scales of their economy. This will further align with the objectives of Atmanirbhar Bharat.

There is an expectancy of the Budget to cover private public partnership, which will encourage the use of the existing physical infrastructure of the Government across India and accelerate skills as well. This can be in the form of income tax benefit or specific grants by the Government.

We are optimistic about the Union Budget 2022-23, which we believe will support a consistent GDP growth of over 8 per cent, despite the challenge of pandemic.
—Dinesh Aggarwal, Joint Managing Director, Panasonic Life Solutions India

 

PLI schemes must be extended

“India’s progress in the renewable energy space over the years has been truly remarkable. We are one of the most attractive investment destinations in the world today for renewable energy. The industry is looking forward to the upcoming Union Budget with certain expectations. We hope that the government resolves the financial issues of distribution companies finances and ensures that contracts that were awarded are respected on the fiscal front. Seeing the excellent response that PLI schemes have attracted, we would like for them to be extended into the future as well. We would also like import duties on items like batteries and electrolytes to be lowered so that we can strengthen our capabilities in areas like green technologies and hydrogen. Last, but not the least, we request that electricity be included in the ambit of GST, as it will result in the reduction of costs and ultimately benefit India’s consumers.”
—Rajiv Ranjan Mishra, Managing Director, Apraava Energy

 

 

Need for climate-change financing

“India’s commitment to achieve net zero emissions by 2070 is ambitious and prudent. However, to achieve this, we must make some important policy interventions today. Conversations on diversifying the renewables portfolio are gaining pace. Along with solar, we need policy paradigms to promote wind power, hydro power, nuclear power, green grid corridors, etc., to ultimately transition to round-the-clock hybrid power. Funding remains another critical need where government intervention would enable fast and smoother actualization of renewable energy projects in the country. I am hopeful that the upcoming Budget will directly address these specific challenges and ease the way for climate change financing to help the country transition to a net-zero emissions economy.”
—Mahesh Palashikar, President, GE South Asia.

 

Rationalization of import duties

Capital expenditure toward smart and clean infrastructure – including toward railways, power transmission and power grid upgradation – should be enhanced to create a multiplier effect in investments and create new employment opportunities to uplift the economy.

India’s aim to be a manufacturing hub for EVs, data centers, solar PV and green hydrogen. This vision is dependent on energy transition financing. That is vital to improve energy efficiency, enable digitalization of power equipment and for climate technology to reach scale locally. This will be equally important for the MSME sector which consumes about 30 percent of the energy delivered to formal industrial units.

Recent spike in raw material prices, increase in freight charges, and disruptions in the global supply chain can slow the energy transition at a precarious time. Government can assist by promoting demand either through easier access to capital.

Also, we expect to see rationalization of import duties especially in energy storage, green hydrogen and carbon capture technologies to help build the local market. Taxes should also be revisited to ensure faster development of the clean energy ecosystem.

Discom dues remain elevated despite recent liquidity infusion. We can look for an appraisal of expected reforms and financial performance parameters, especially for renewable IPPs, who will contribute significantly to India’s COP26 goals.
—N. Venu, MD & CEO, Hitachi Energy India

 

Increased focus on housing

“The wires & cables industry in India has always been an essential part of the manufacturing industry. With the upcoming Union Budget, we would like to see the government’s increased focus on sectors such as infrastructure, healthcare and affordable housing as this encourages the demands for manufacturing and thereby wires and cables significantly.

In an effort to continue the economic growth of the country, we hope the Government will lower the interest rates and make higher capital availability to MSMEs as they are the backbone of the Indian business market and ultimately help generate employment.
—Shreegopal Kabra, Managing Director & Group President, RR Global

 

Enhanced allocation for RE

“India has envisioned reducing net carbon emissions to zero by 2070, committing to install forty percent of its electricity generation capacity from non-fossil fuels by 2030. Smart Power India (SPI) is aligned to this government goal and our initiatives too are aimed at enhancing energy access and deployment. We have partnered with the Government of India in the past to leverage the existing grid infrastructure for equitable distribution of electricity & intend to expand on it to achieve the goal of enabling clean and cost-effective electricity access for maximum rural/low-income households. The investment in the green energy corridor (GEC) by the government is a positive development for the industry and will enable private players to effectively participate in energy transition missions. In the upcoming budget, we hope there will be an increased emphasis on appropriate utilisation of natural resources and financial allocation for renewable energy capacities to thrive, which will give a huge impetus to the sector’s growth in the future.”
—Jaideep Mukherji, CEO, Smart Power India

 

Net metering policies need uniformity

The Government has set an ambitious target of achieving 500 GW of renewable energy by 2030. However, it looks like an uphill task considering the current rate of addition. Some policy reforms are, therefore, needed to encourage the private sector in driving this initiative. The ‘Net metering Policy’, being a key growth driver of renewables, is also not uniform across the states and needs to be amended. We’re also awaiting the ‘Amendment to Electricity Act’ to be rolled out to bring reforms in the distribution segment.

The basic Customs Duty (BCD) that is scheduled to be implemented from April 2022 will have a significant impact on the cost of solar projects and the tariff. Hence, the BCD implementation needs to be postponed for at least six months. The GST on solar modules increased recently from 5 per cent to 12 per cent thereby, impacting the solar installation cost. In order to encourage solar installation, the GST should be reduced to 5 per cent. Lastly, a continued boost for the Data Centre sector by introducing relevant policies and reforms is the need of the hour.”
– George Menezes, COO, Godrej Electricals & Electronics

 

Tax relief for consumer confidence

“India is stepping towards becoming global manufacturing hub and it is anticipated that by 2030, it can add to the tune of $500 billion annually to the global economic stake. In the budget 2022, the focus should be on rationalization and simplification of taxation within the given fiscal space. The much-anticipated tax relief would increase consumer confidence and keep demand robust. Following the Covid-19 outbreak, the manufacturing industry is undergoing a transformation, with global supply lines being disrupted. The emphasis currently is on ‘reshoring’ manufacturing processes and reestablishing markets with faster delivery times. The government’s ‘Vocal for Local’ program need more policy support to adapt to lower working capital and boost resiliency. Also, with the start of work on new scheme for several manufacturing sectors with an outlay of about Rs.16,600 crore for the next five years to support technological upgradation in existing clusters and MSMEs, we might hear some announcement in the upcoming budget. ”
—Frans Van Niekerk, Managing Director, Atlas Copco India

 

More expectations on RE front

“With this year’s budget, we have more expectations from the government with regards to renewable energy which can spur the growth of the sector. PLI Schemes will be incentivised, due to which module manufacturing will go up. Hence, we are expecting allocation towards module manufacturing. The government should come up with RTC tenders. With the increasing prices of batteries, government should put efforts in this direction. There should be an increase in the PLI amounts for manufacturing batteries in India. Clearance of pending DISCOMS bills should be resolved and more budgetary allocation to be made to improve the fiscal health of electricity distribution companies. We expect the electricity sector to be brought under the ambit of GST and Solar contracts with multiple slabs to be streamlined to a single slab. This will help to reduce the cost of solar installation and reduce ambiguity in the sector. We are expecting new policies around green hydrogen. While the National Hydrogen Policy and a few pilot projects are encouraging initiatives, the buzz now needs to be converted to action on the ground. Allocation to incentivise cheaper production of green hydrogen is needed since the economy will be centered around it.”
—Amit Jain, Global CEO – Sterling and Wilson Renewable Energy

 

 

Reduce reliance on outsourced technology

“Solar will play a key role in reaching net-zero emissions target by 2070. Incentives and targeted policies for manufacturers of solar raw materials need to be introduced to ensure a strong and self-reliant domestic solar manufacturing ecosystem. Focus should also now be on creating skilled professionals in cell and wafer manufacturing. Further, the government must provide capital subsidies or tax credits for the establishment of R&D centers to reduce reliance on outsourced technology.”
—Bharat Bhut, Co-founder and Director, Goldi Solar

 

Long-term policies for energy transition

The industry expects long-term policy stability to promote investments in the sector and there are various areas where the budget can provide that stability. The weakest link at the distribution companies end still remains to be addressed and it will be prudent for the government to provide long term solution to ensure their viability so that the large scale power plants can continue to attract investments.

Distributed solar is an important element of the energy transition and it will be useful for the country to provide tax rebates to the residential solar prosumers so that the solar rooftop and storage can pick up in a big way. The solar rooftop provides huge benefits like no new transmission requirement, utilisation of idle roof spaces and increased employment. This will also involve the citizens in a big way in fulfilling our Prime Minister’s vision of a green economy.
—Sanjeev Aggarwal, Managing Director & CEO, Amplus Solar

 

Pushing renewable energy

Indian renewable energy industry continues to maintain high speed growth and  play leadership role at global level in pushing renewables. To help it sustain its journey of growth, renewable Industry expects the 2022 Budget to further facilitate and provide imputes this growth by: driving  local manufacturing prowess in renewables and making it technologically savvy to continuously optimise cost and efficiency to achieve lowest cost of power to society in the long run; and, providing adequate incentives and tax reliefs to Industry to help India become a renewable manufacturing hub. It is also expected that GST on RE equipment is rolled back from 12 per cent to 5 per cent.
—S.K. Gupta, CFO, Amp Energy India

 

EV charging infra needs a boost

While the last couple of years have marked the turning point in the EV history of India, the upcoming Union Budget is crucial owing to the uncertainties associated with the national contagion. Firstly, it is imperative to boost the charging infrastructure in the country as it can directly impact sales by minimising range anxiety and encouraging adoption. India has the potential to emerge as the innovation hub as only 2 per cent of new vehicles are globally electrified and we can significantly contribute to the growing needs of the emerging markets.

Keeping in mind the importance of the role of batteries in the ongoing EV revolution, the upcoming budget must relook at the PLI Scheme and make the required alterations to propel Lithium cell manufacturing in the country.

Another key aspect that the Budget should focus on is the reduction of GST. Though not a budget item, reduced GST by the GST Council for EV Lead acid batteries from 28 per cent to 18 per cent, and 18 per cent to 5 per cent on lithium-ion batteries can widen acceptance of EV in India.

Although the government is keen on pushing e-mobility, we require a comprehensive financing structure that will fuel the pace of growth and enable us to scale operations.
—Pratik Kamdar, Co-Founder, Neuron Energy

 

Making EVs affordable

“The government’s done a splendid job of supporting the EV ecosystem in India till date. However, there are a few areas they can address to further spur growth.

Due to the inverted tax structure that currently exists (where EVs are taxed at 5% and battery packs alone at 18%). Several constraints are placed on new OEMs as well as the development of new models like Battery As A Service.

While the nodal and state level delegation of charging station deployment and policies around that make the process faster, infrastructure spending support for discoms to support EV charging will accelerate deployment of charging stations across the country.

The government has rightly introduced the PLI scheme to foster domestic production of Li-ion cells but the time taken to set up a cell manufacturing ecosystem will take at least 3 to 5 years. In the interim, reducing the import duties on Li-ion cells would greatly benefit EV startups to make EVs affordable and spur consumer demand.”
—Arun Vinayak, Co-founder & CEO, Exponent Energy

 

PLI schemes for storage devices

“The current domestic manufacturing capacity is woefully inadequate to meet the current and future demands of solar modules. We need to allow our domestic manufacturers time to ramp up their capabilities and enable capacities envisioned under the PLI scheme to come to fruition. A BCD implementation coupled with the recent ALMM order will create a massive shortage of modules in the country apart from increasing prices multi-fold. This could potentially derail the solar targets set for 2030. The government should provide a PLI scheme for boosting the production of storage devices and hybrid inverters in the country. The increased use of such devices will increase penetration of roof-top solar and better grid stability.”
—Animesh Damani, Managing Partner, Artha Energy Resources

 

Boosting real estate

“While the real estate sector is looking at a robust housing demand revival in 2022, it is also expecting that the Union Budget 2022 will play a supportive and enabling role. As estimated, the Indian economy is expected to grow at 9%, stimulating demand for better infrastructure. Some of the key industry expectations from the budget 2022 are infrastructure status for real estate sector, need for liquidity-boosting measures, GST waiver for under-construction properties, impetus to affordable and rental housing, extension of credit linked subsidy scheme (CLSS) and enhancement in interest deduction limits on housing loans, customer-friendly steps such as tax reliefs to homebuyers, and single-window clearance mechanism to fast track approvals to avoid project delays. As the pandemic situation surges at the beginning of the year, an industry favorable Budget is likely to play a crucial role in shaping the entire year for the real estate and allied industries.”
—Manish Mehan, CEO & MD, TK Elevator India

 

Incentivising energy storage

“To meet India’s goal to fulfil 50 per cent of its energy requirements from renewable energy solutions by 2030, it is crucial that the 2022 Union Budget focuses on incentives and policies to promote investments in the energy storage segment. Further reducing the GST taxation on Lithium-ion batteries and incentivising technology adoption in the renewable energy and storage space will be the key to enabling smarter products that allow energy independence. We hope that this year’s budget provides additional sops or incentives to boost the use of renewable energy solutions for various applications that include commercial, industrial, residential, off-grid, etc. This move will help to encourage the adoption of green technology which is vital to building a sustainable and zero-emissions future.“
—Rahul Kale, Founder and CEO, Sunpower Renewables

 

Clean and affordable energy

“India’s commitment to becoming an energy-independent nation by 2047 and achieving net-zero emissions by 2070 entails bold and ambitious targets to become a global hub for renewable hydrogen and reduce the carbon intensity of its economy by less than 45 per cent by 2030. The government’s infrastructure spending including under the national infrastructure pipeline on affordable and clean energy would be one of the key pillars. The Budget should focus on fiscal concessions and capital subsidies to support the capital expenditure to be undertaken in this regard.”
—Shriprakash R. Pandey, CMD, Commtel

 

Turning around discoms

The weak financial profile of state-owned distribution utilities (discoms) continues to remain a major area of concern for the power sector. Achieving a turnaround in the distribution segment remains a key factor to achieve the renewable capacity targets announced by the Government. This would require focus on improvement of operational efficiency and allowing timely pass through of cost variations via tariffs to the consumers. ICRA expects the Budget to focus on accelerating the implementation of reforms in the distribution segment including the proposed delicensing initiative. Further, the budgetary allocation is expected to be increased towards strengthening the distribution infrastructure under the “reforms-based and results-linked” scheme announced in the last Budget. Also, ICRA expects the budgetary allocation to be increased for strengthening the transmission infrastructure (both at intra-state and inter-state level), towards evacuating power from the regions having high renewable power generation potential.”
–ICRA [Credit rating agency]