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The renewable energy sector, in the upcoming union budget 2017-18, is looking for clarity on policy direction and incentives that will help continue growth across the sector, said Mahesh Makhija, Director, Business Development and Commercial (Renewables), CLP India.
“To begin with, first question is whether the GST (Goods and Services Tax) will roll out and whether electricity sector will form part of the GST domain and be taxed at zero per cent under GST, which will allow claiming GST refund for operating expenses incurred,” he said.
Makhija added, this way, per unit cost of power generation can be reduced and benefits can be passed to the consumers. He further said a key point in the power sector wish list is the extension of generation based investment (GBI) Scheme for wind energy, which will be crucial to smoothen its transition from an investment-based incentive to an outcome-based incentive, thereby broadening the investment base further.
“A prominent concern in the sector is with regards to the Minimum Alternate Tax (MAT) rate increase which has moved up from nearly 8 per cent to around 21 per cent. It is necessary to have a mechanism for upward revision in power tariff to the extent of increase in tax rates or levy of any new tax by the government, which at present is missing in most of the regulatory orders,” he said.
Makhija noted that in addition to the UDAY scheme, an incentive mechanism for power distribution companies on timely payments and new renewable energy procured for fulfilling the renewable purchase obligation targets can be introduced as well.
“To create an investor-friendly environment, the budget should focus on implementing a strict penalty framework to solve the issue of inordinate delay in payments by distribution utilities in certain states that have adversely impacted cash flows of the IPPs (independent power producers),” he said.
Finally, the National Clean Energy Fund should be utilised more effectively by allotting certain funds to various state discoms to make payments only to Renewable energy developers, he added .
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