Budget 2023-24 Expectation: Provide tax holidays to energy sector to increase ease of doing business
The government must provide incentives to companies investing in green technology
Solar panels. AP
Ahead of the Budget season, every sector is expecting changes. The ‘energy industry’ is one such new sector that is hoping for some investment and adjustments to meet the demands of the Indian economy’s altering dynamics.
The year 2022 has been a roller coaster ride for several businesses with the Russia-Ukraine war. This has impacted the economy along with the global energy market.
Union Budget of 2023 is expected to bring a major focus on the energy and pump sector. With the increasing demand for efficient energy infrastructure, it is expected that the government will make substantial investments in solar pumps and solar motors to promote renewable energy sources.
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It is also likely that there will be a focus on improving the efficiency of existing energy infrastructure, such as power plants and transmission networks. The Budget is also expected to provide incentives for companies investing in green technology, such as electric vehicles and battery storage systems.
It is likely that there will be an emphasis on developing new technologies to reduce emissions from traditional sources of energy generation.
Budget to focus on energy sector
We anticipate the Union Budget to place a major emphasis on the energy sector. Considering the stated targets in green energy and its significance for economic growth, the government is likely to broaden the PLI incentives to integrate supply chains, fund and mobilize resources, and counteract the possibility of global risks and slowdown in development.
To meet the goal of using non-fossil fuel power, solar will continue to play a significant role. Tax holidays should be provided to increase the ease of doing business in this technologically intensive industry.
The government could also consider allowing the availment of credit or reducing the Goods and Services Tax (GST) rates for the supply of raw materials used in the manufacturing of solar products.
Concessional import duties on solar modules
A major focus of the Budget will be to encourage the manufacturing of domestically produced cost-effective solar modules. A relief in GST for R&D products required in the development of solar modules could go a long way in establishing sufficient infrastructure for research and development that meets global standards at competitive prices. We believe that the government will offer concessional import duties on solar modules, which could defeat Atmanirbhar Bharat’s purpose of import substitution.
Green Bonds to help energy transformation
Ahead of budget 2023, the Reserve Bank of India (RBI) announced Sovereign Green Bonds. To mobilise funding for green infrastructure, sovereign green bonds will be issued. The Green Bonds will not only help India’s energy transformation efforts but will also make funds accessible for green infrastructure and renewable energy projects.
We believe that the sector will be able to report steady revenue growth and consistent operating margin going forward due to enhanced traction in the export business, growing contribution from the retail business, strong emphasis on technological advancement, and acceptance of new products.
Increase awareness for solar pumps
The PM-KUSUM scheme is a significant initiative for solarisation that focuses on farmers who hold most of the market share for solar pumps. However, progress has been slow thus far; some states have approved solar pumps but haven’t installed any, while most face the challenge of increasing awareness among the farmers about the scheme.
In the future, we anticipate the availability of financing options for farmers in the form of formal credit to cover costs that are not subject to subsidies, the adoption of the proper pricing model to effectively expand the installation to remote areas, and the streamlining of administrative procedures.
Provide infra for adoption, expansion of EVs
Another major focus of the Budget will be to provide the necessary infrastructure for the adoption and expansion of electric vehicles, by offering tax breaks and development incentives. After the success of the first and second rounds of the Production Linked Incentive (PLI) Scheme, the third round should also be announced to attract investment in Electric Vehicle Component Manufacturing by offering incentives to non-automotive investors/startups equivalent to the incentive available to the existing automotive Investor.
India is on the brink of a major transition in its energy sector. The Union Budget for 2023 is an opportunity to invest in efficient energy infrastructure and renewable energy sources such as solar pumps and motors. This Budget should focus on providing incentives to companies that are working towards creating a more sustainable future.
The writer is the Chairman and Managing Director of Shakti Pumps (India) Ltd– manufacturer of energy-efficient stainless-steel submersible pumps, pump motors, solar pumps, and pressure booster pumps. He tweets @ShaktiDinesh @ShaktiPumps
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