India's renewable energy plans likely to be derailed

Thanks to underutilisation of funds and poor capacity generation 

By Kundan Pandey
Published: Monday 30 April 2018

Prime Minister Narendra Modi had made some big promises when he came in to power and going renewable was one of them. He promised that India will have 175 gigawatt (GW) installed capacity of renewable energy by 2022. However, it is almost clear that his government is losing the momentum in this area and the target will not be met, if it does not accelerate the effort.

The country’s renewable energy capacity till December 2017 was just 62.84 GW (36 per cent of the target). Expressing disappointment with the government’s performance so far, the 39th report of the Standing Committee on Energy finds that the Ministry of New and Renewable Energy (MNRE) has been unable to utilise the funds for the past two years. The report, tabled in both the houses of Parliament on March 13, highlights that MNRE could utilise only 63 per cent, 65 per cent and 70 per cent of the total fund allocation during the 2015-16, 2016-17 and 2017-18 (up to December 2017) respectively. The Committee, chaired by Kambhampati Hari Babu, a Bharatiya Janata Party leader from Andhra Pradesh, says, “Such low utilisation of allocated funds is beyond comprehension and is indicative of poor financial planning by the ministry”. The report, however, adds that budgetary allocation is usually lower than what MNRE demands and even that gets reduced during the revised estimates. For example, in 2017-18, MNRE received Rs 5,472.84 cr against the demanded Rs 5843.96 cr. The budget was further reduced to Rs 4,080 cr at the revised estimates stage. This practice of lowering the budget “is not in sync with the humongous targets”.

The committee also questions MNRE’s “seriousness and commitment” which has continuously missed the physical targets. In 2016-17, India could meet 68 per cent of the 16,600 MW grid-connected renewable power target. Till December 2017, it had met just 38 per cent of the 14,555 MW target for 2017-18. “Year-on-year non-achievement of the physical targets will derail the entire mission of achieving 175 GW by 2022,” warns the report. It adds that while the country is on-track with its wind power commitments, it is lagging behind in solar and biomass energy capacities (see ‘Loss of energy’).

Under utilisation of funds can also be seen in the research and development (R&D) of renewable technology. In 2016-17, budget estimates of Rs 445 cr was reduced to Rs 272.85 cr during revised estimates. In 2017-18, the initial allocation was Rs 144 cr which was reduced to Rs 81 cr during revised estimates. Even the reduced amounts could not be fully utilised, says the report, demanding regular monitoring.

The Goods and Service Tax (GST) that was introduced last year further worsened the industry performance. Despite announcing that all renewable energy devices and spare parts will be in the 5 per cent slab, different GST rates are applicable for various components of the solar projects. While solar modules attract 5 per cent GST, invertors and batteries fall under the 18 and 28 per cent slabs. Recommending an urgent intervention, the committee says, “Such a situation (of confusion regarding applicability of GST rate) will lead to increase in generation cost and pose a threat to the viability of the ongoing projects, ultimately hampering the target achievement.”

The performance of the five institutions that aid MNRE in achieving the targets—Indian Renewable Energy Development Agency (IREDA), Solar Energy Corporation of India (SECI), National Institute of Solar Energy (NISE), National Institute of Wind Energy (NIWE), and National Institute of Bio Energy (NIBE)—has also been subpar. Stating that MNRE has furnished incomplete information, it says only IREDA, which provides term loans for renewable energy and energy efficiency projects, is meeting its targets. It warns that the current target of SECI, which implements the Jawaharlal Nehru National Solar Mission, is substantially higher than the previous years. The report finds under utilisation in NISE, the technical focal point for solar energy R&D, and NIWE, the technical focal point for wind power R&D. It adds that the budget allocation of NIBE, which focuses on bio-energy R&D, has been fluctuating. The institute received Rs 5.6 cr in 2015-16, nothing in 2016-17 and Rs 2 cr in 2017-18.

With these highlights, the committee recommends a slew of measures, including realistic budgets and exhaustive plans to utilise them. It also recommends proper and continuous monitoring of the implementing agencies.

Loss of energy

Target (2017-18): 10,000 MW
Achieved: 62% till Jan 2018
india IS nowhere close to realising its target of 100 GW of solar power capacity by 2022. With close to 18,500 MW installed capacity, the country has to set up 20,000 MW additional solar capacity annually for the next four years.

In 2017-18, against the target of 10,000 MW of grid-connected solar power, just 6,166 MW was set up. The report blames the failure to set up solar parks and solar rooftops for the current performance. The Ministry of New and Renewable Energy (MNRE) told the committee that state governments are not showing interest in solar parks because they take a lot of area to be set up. To deal with the challenge, the ministry has decided to reduce the size of solar parks to up to 50 MW and in special cases even up to 20 MW from the existing average size of 500 MW.

The report also raises concerns over the domestic manufacturers' inability to compete with foreign players. It, however, says the recent move to revise custom duty on solar cells/modules/panels to 7.35 per cent and introduce a safeguard duty of 70 per cent will be counterproductive. ªSuch a duty will result in steep rise in input cost, thereby affecting the viability of existing projects and dampening investors' sentiments,º the report says.


Target (2017-18): 5,000 MW
Achieved: 5.4% till Dec 2017
Terming INDIA'S target of 40 GW of installed rooftop solar power by 2022 ªunrealisticº, the committee has asked MNRE to give a ªserious relook to the programme, which could derail the entire National Solar Missionº. It says that consumers have ditched the programme ªdue to high maintenance cost and delay in disbursement of subsidyº. While hailing the new KUSUM initiative, where farmers can supply excess power to the grid for money, it warns cash-strapped distribution companies might not be able to pay the farmers which will ªfurther alienate the farmers and will have serious repercussions for the governmentº. The report says the government should find a simpler and faster subsidy disbursement process and introduce a way through which consumers can pay the capital cost of rooftop solar set up in installments.


Target (2017-18): 4,000 MW
Achieved: 15% till Jan 2018
while MNRE has done significant work since 2015-16, its performance last year has been subpar. In 2015-16, it added 3,423 MW wind capacity against the target of 2,400 MW. In 2016-17, it added 5,502 MW capacity against the target of 4,000 MW. In 2017-18, only 597.91 MW capacity was installed till January 2018 against the target of 4,000 MW. The report also highlights under budgeting when it says that to achieve just 15 per cent of the target in 2017-18, MNRE had exhausted the entire budget of Rs 400 cr. It adds that the Rs 750 cr budgeted for 2018-19 might not be enough to meet the physical target of 4,000 MW.

Another positive of the wind sector has been the country's ability to domestically produce 70 per cent of wind turbines, which are among the cheapest in the world. MNRE is also planning to install its first Wind-Solar Hybrid Park of 160 MW in Andhra Pradesh. ªWind and Solar are complementary and hybridizing these two technologies would help in minimizing the variability apart from optimally utilizing the infrastructure,º the report says.


Target (2017-18): 340 MW
Achieved: 74% till Jan 2018
The SECTOR'S performance in the past three years has been discouraging. The estimated potential for power generation from biomass/bagasse co-generation in the country is 25,860 MW. Against this, a cumulative capacity of 8,414 MW has reportedly been installed in the country (as on December 31, 2017).

In 2015-16 and 2016-17, the government had a target to set up additional capacity of 400 MW each year but achieved only 305 MW and 162 MW, respectively. Little improvement was noticed in 2017-18 when MNRE installed 253 MW capacity against the target of 340 MW. The government has also failed to utilise its biomass budget in the past three years. MNRE blames non-signing of Power Purchase Agreements by distribution companies, lack of working capital and non-availability of biomass for the sector's poor performance.

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