Can Budget 2022 make India's power sector future ready?

With yet another Budget Day drawing closer, different key sectors of the economy are looking forward to several policy support- measures and sops from the government to steer their ways clear through these challenging times. The finance and economy managers of the government, on their parts, are burning midnight oils to accommodate as many sectoral demands as possible into the budget proposals and provisioning. The renewable energy (RE) segment, which remains the key focus area for the government in the power sector, for instance, is looking forward to the availability of adequate long-term financing avenues at competitive rates, without which it cannot achieve the targets set by the government for the sector.

Now, what are these targets? Prime Minister Narendra Modi has time and again announced to increase the non-fossil-fuel-based capacity to 500GW by 2030 from 150GW currently and meeting 50 per cent of the energy requirement from renewable sources by 2030. Mind you that this requires an annual capacity addition of 42GW over the next eight years, necessitating multi-billiondollar investments during this period. Further, incentives and policy measures are required to promote investments in the energy storage segment considering the increasing share of renewables in the electricity generation mix and the need for adequate balancing sources. This apart, policy measures are required to revive the stranded gas-based projects, which would enable availability of balancing power sources.

It is expected that the funding outlay for the production-linked incentive (PLI) scheme for solar module manufacturing would be increased, given the strong interest from the prospective players under the tender issued by IREDA. This, in turn, would augment the domestic module manufacturing capabilities.

Mind you that this budget is being placed at a time when the weak financial profile of state-owned distribution utilities (discoms) continues to remain a major area of concern for the power sector. Achieving a turnaround in the distribution segment remains a key factor to achieve the renewable capacity targets announced by the Modi Government. This would require focus on improvement of operational efficiency and allowing timely pass through of cost variations via tariffs to the consumers.

Therefore, the forthcoming Union Budget should ideally focus on accelerating the implementation of reforms in the distribution segment including the proposed de-licensing initiative. Further, the budgetary allocation needs to be increased towards strengthening the distribution infrastructure under the 'reforms-based and results-linked' scheme announced in the last Budget. The budgetary allocation should also be increased for strengthening the transmission infrastructure (both at intra-state and inter-state level), towards evacuating power from the regions having high renewable power generation potential. At the end of the day, one must remember that India has also announced its target to be carbon-neutral by 2070, which would need carbon-intensive sectors like thermal power to invest in cleaner methods. And India will have to do whatever needs to be done to promote its renewable energy sector.