Renewable policies

Conducive policy environment necessary to take renewable projects to the people

 
Last Updated: Saturday 04 July 2015

the biggest barrier to commercialisation of renewable energy in the country remains political apathy. Our non-conventional energy programme, when it began way back in 1980, was lauded, particularly for the system of subsidies and tax benefits. In fact, India's solar energy programme ranked among the largest in the world. Today, it is at the crossroads, awaiting a national policy. If only the government could have kept its commitments. Ironically, just when consumer interest in this clean and abundant energy form is growing, incentives to promote it are being pulled out. Take for instance, solar energy projects financed through Indian Renewable Energy Development Agency (ireda). With the World Bank / Global Environment Facility (gef) support for ireda ending last year, the consumers are now faced with a steep rate of interest, up from 2.5 per cent to as high as 13.5 per cent. Despite talk of interest subsidy scheme by the Ministry of non-conventional energy sources (mnes), the bottom line for the consumer is that this change is a big disincentive.

What is beyond comprehension is why this high interest rate is being charged by ireda, which is higher than even the commercial rates offered by banks? Are solar projects a risky investment option? Is this the message ireda, the agency set up with the explicit purpose of promoting renewables, is keen to broadcast. After all, the soft loans were meant to support renewables and give fiscal advantage to this sector for the simple reason that the capital cost involved is much higher than the conventional fuel cycles. But with this high commercial rate of lending, ireda is in effect killing solar power projects.

Another significant obstacle under the prevailing economic conditions is that renewable energy technologies suffer from lack of confidence from investors, governments and users, low levels of knowledge about their technical and economic potential and a general resistance to change and new ideas. For the country's renewable energy programme to be viable, it is vital that, among other measures, tax incentives are provided, state electricity boards adopt an attractive wheeling policy and the interest rate on borrowed capital is lowered.

Government must play a crucial role in ensuring a conducive policy environment through the provision of remunerative prices, fiscal incentives, and backup financial support through direct and indirect subsidies. The fact remains that renewables remain unaffordable for the poor without fiscal support schemes. And since the initial cost is high even with the subsidies, it is imperative to have an affordable financing scheme and none of the current convoluted procedures. Government must change its attitude, otherwise renewables will remain a dream that was never realised.

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