Budget 2021 Highlights For Solar Sector

In a budget speech that will eventually be termed as focused on fire-fighting and consolidating reforms, Finance Minister Nirmala Sitharaman announced her budget today.

For the solar sector, the big shock is undoubtedly the increase in customs duty on solar inverters from 20 percent. Including inverters, which have a much smaller share in overall project costs, is likely to lead to a net 2-2.5% increase in overall project costs. And this will happen across all large projects, as the utility category is dominated by imported inverter brands.

This was done, even while leaving the issue of customs duty on modules and cells hanging, presumably for April 2022, as the ministry has all along indicated.

Among other news, the government has announced an additional allocation of Rs 1000 crore for SECI, and Rs 1500 crore for IREDA.

On the discom front, there seems to be stronger intent, with a promise to provide consumers more choice in picking a discom. That means both privatisation as well as additional discoms in many markets across the country. A revamped reforms-based result linked power distribution sector scheme has also been promised which will be launched with an outlay of 3,05,984 cr over 5 years. To help modernise, and clean up the sector.

A hydrogen energy mission 2021-22 to be started, for the production of green hydrogen using renewable resources. This is a key move, as it finally tries to create a major demand generator for renewable energy, for production of green hydrogen. Of course, the real impact will be long term, but at least the country is trying to catch up with the rest of the world with initiatives in the space.

On the distributed solar front, the duty on solar lanterns has also been increased from 5 to 15 percent, to push domestic manufacturing.