The Union Budget 2017 brings with it the promise of accelerating India's growth engines against the backdrop of demonetisation. However, as someone who works in the energy access space I was unclear and curious what the budget means for the energy sector in India.
I interviewed industry expert Hari Natarajan who has over 15 years of experience in the energy sector and is currently the CEO of Clean Energy Access Network (CLEAN), an all-India representative organisation launched in 2014 with a clear mandate to support, unify and grow the decentralised renewable energy (DRE) sector in India. CLEAN aims to bring together diverse stakeholders across India working to improve energy access for the rural and urban poor using clean energy solutions. The network currently has 111 member-organisations that offer a range of solutions across solar, hydro, biomass and wind technologies and at scales ranging from portable products to rooftop installations and community level installations.
Strengthening the decentralised renewable energy sector in India is in the best economic, social and environmental interests of present and future generations.
My main question for him was around the kind of budgetary support that would contribute significantly to alleviating the conditions of energy poverty amongst the rural and urban poor by enabling improved access to decentralised clean energy solutions. Here are his thoughts on the matter.
Tell us about the decentralised renewable energy sector and its relevance.
While access to modern and sustainable forms of energy is enshrined as one of the key global Sustainable Development Goals (SDG 7) and renewable energy has become something of a national buzzword, the problem of access to cleaner, more efficient forms of energy for an Indian population ranging from 50 million households (in the case of electricity) to over 150 million households (in the case of cooking energy) is continually underplayed. In a country facing large scale infrastructural and fiscal challenges in extending the centralised, overburdened electrical grid and LPG supply chain to these underserved pockets, decentralised energy solutions that contribute to India's Intended Nationally Determined Contributions are integral to social and sustainable developmental imperatives.
India has a small but significant number of players working to serve these households in rural, remote geographies as well as informal, neglected settlements in more urban areas. CLEAN, an industry representative body set up to amplify the impact of these players, estimates that there are more than 700 such small to medium businesses and non-profits who are directly or indirectly involved in bridging the deficit of energy access in the country through sustainable ways. The technologies and business models deployed by this sector are suitably diverse to meet the needs of end users on the ground; this includes among others small 20 to100 watt grid-independent solar rooftop systems, domestic biogas units, biomass-based improved cook stoves, community-owned pumps, local microgrids with a capacity of a few hundred watts to a few kilowatts and minigrids up to a few hundred kilowatts technologically capable of connecting to the grid and selling back surplus electricity.
Why should the budget pay greater attention to the issue of energy access?
Greater prioritisation for expenditure on energy access from public and private sectors over more traditional portfolios such as education, healthcare and now sanitation (which together received the lion's share of CSR support at 61%) will ensure a holistic developmental trajectory for India as these verticals complement and support each other in delivering a quality of life that every Indian deserves.
What was the sector's expectations or desires from the budget (and the Ministry of Finance in general)?
The sector is largely made up of young enterprises that would qualify as startups and that cite affordable working capital debt as the critical unmet need in the sector. There is general recognition among the central and state government departments of the importance of these enterprises but in order to achieve greater scale and impact, there is need to recognise DRE as an independent portfolio while earmarking funds within flagship schemes for entrepreneurs such as MUDRA or Start-up India, visioning different industry requirements within capacity building programs such as the Deen Dayal Kaushal Vikas Yojana or even meeting disbursement targets within Priority Sector Lending.
Institutionalising processes for better monitoring of lending to the DRE sector will go a long way in ensuring that marginalised communities receive better access to energy services.
While the outflows from popular schemes like MUDRA total more than ₹90,000 crores in the last year alone, data collected from energy access practitioners reveal that there is very little benefit availed from banks under the scheme. Institutionalising processes for better monitoring of lending to the DRE sector will go a long way in ensuring that marginalised communities receive better access to energy services.
Other public funds like the National Clean Environment Fund (originally the National Clean Energy Fund) have direct relevance in supporting clean energy services and the government should aim to deploy the largely underutilised corpus of ₹54,000 crores collected since 2011 for DRE projects to balance the current trend in disbursements for administrative rather than impact-oriented purposes.
What is your view on the optimal taxation and subsidy policy for the sector?
We welcome any policy that gives the end consumer more agency to use the energy source of their choice and we have been pushing for direct cash transfers along the lines of Universal Basic Income as an alternative to product based subsidies. That having been said, the apex ministry for the sector, Ministry of New and Renewable Energy estimates that the implementation of GST will add up to 20% to the costs of DRE projects. Given the current ideology of the government to shift to cleaner forms of energy, there should be equitable policies to bring renewable energy on par with the conducive environment currently enjoyed by electric utilities and petroleum, and characterised by tax exemptions and subsidies. The government can also look at allocating a portion of the universal Krishi Kalyan Cess introduced in last year's Budget towards the promotion of solar water pumps and other sustainable irrigation practices. Manufacturing of solar lanterns and renewable technology components should qualify for exemptions from the inverted duty structure insofar as they align with the goals of the Make in India mission. System integrators and exclusive distributors and manufacturers of DRE solutions should be eligible for direct tax holidays up to a period of five years.
While the government aims to attain high rates of economic growth and attain 100% village electrification by May 2018, we must look at decentralised renewable energy as a complementary solution for ensuring affordable, reliable and universally available energy. We must make energy security and clean energy access high on India's priorities to attain sustainable economic development, for without energy, medicines cannot be refrigerated, machines cannot be operated, and children cannot be regularly educated. In these situations, our economy cannot be improved. Therefore, strengthening the decentralised renewable energy sector in India is in the best economic, social and environmental interests of present and future generations.