What's in store for the energy and power sector in Budget 2020

The first week of February 2020 was eventful as the union budget was announced spreading a mixed wave of emotions in the country. The budget apart from talking about changes in the tax brackets for the salaried, direct tax announcements also talked about the renewable energy industry and made announcements for the future of the renewable sector. We talk a walk through the announcements made and how will it fare in the coming years.

• MNRE received a major boost with their budgetary allocation increasing by 48% in comparison to the revised allocation in the last financial year

                        * Revised budget

• To give a boost to the ongoing KUSUM scheme announced in July 2019, a budget of INR 1000 crore is allocated to the scheme. 

 
Since the inception of the scheme the following components have been included:
Component A: Setting up to 10,000 MW of decentralized grid-connected renewable energy power plants on barren land. 
Finance: A Procurement Based Incentive (PBI) @ 40 paise/kWh or Rs. 6.60 lakhs/MW/year, whichever is less, was approved to be provided for the first five years by MNRE to DISCOMs, for buying the power from farmers/developers.
Component B: Installation of 17-50 L stand-alone solar agriculture pumps
Component C: Solarisation of 10 L grid-connected agriculture pumps 
Finance: For Component B&C, a CFA of 30% of the benchmark cost or the tender cost, whichever is lower. State Government subsidy 30%; Remaining 40% by the farmer and in North Eastern States, Sikkim, J&K, Himachal, Uttarakhand, Lakshadweep and A&N Islands, CFA of 50%, State Government subsidy 30%, Remaining 20% by the farmer.

• In order to reduce the burden of railways for power procurement, proposal to build solar plants on railway lands

 
In order to reduce the excessive fuel bill for diesel, electrification of Indian railways was introduced to achieve cost-effectiveness. Currently, 65.4% of freight traffic and 51.2% passenger traffic is hauled on 39.2% electric network. As per a study carried out by TERI, electric traction is found to be about three times more energy-efficient than diesel traction. Electric traction can use alternate & non-conventional sources of energy like wind and solar. The implementation of building solar plants will depend on land assessment, power off-take/evacuation and maintenance of the projects.

• Installation of pre-paid smart meters against the traditional meters until FY 23

 
The idea is to provide the consumers with the right to choose the supplier and rate, provides market reflective tariff on real-time. Further, providing an opportunity to multiple distribution licensees for supplying to customers at a rate which is competitive compared to the commission derived rates. This initiative has the potential to reduce the AT&C losses and improving the billing process bringing consistency in the current ad-hoc situation.

 
The budget does look promising at the face of it, now the task is to see how well does the execution of these allocations take place and whether we can enable the power & energy sector to be self-sufficient in the coming years as we march towards the target of becoming a green nation.