Minister proposes relief for India's solar sector in budget speech

March 19, 2012

The Indian Finance Minister Pranab Mukherjee on Friday announced relief for the solar energy sector by proposing to scrap duties on imports of solar-thermal equipment as the country it seeks to reduce project costs for Reliance Power and other developers adding plants as part of his annual budget speech

 “Solar-thermal projects need encouragement,” Mukherjee said in his speech, proposing to spare such ventures from the so-called special countervailing duty.

 The exemption would lower costs for the seven companies building a third of India’s planned solar capacity using solar- thermal technology, which concentrates sunlight to boil water, used to power steam turbines. Reliance Power is importing turbines from Areva SA, while the others have ordered units from suppliers including General Electric and Siemens AG.

The special countervailing duty on imports is equal to the excise duty imposed on similar local products, Anil Kumar Lakhina, managing director of the Forum for Advancement of Solar Thermal, an industry group, told Bloomberg. It’s a tax of about 8 percent to 9 percent on most equipment used to build solar-thermal plants, such as reflective mirrors and turbines, according to his estimates.

Mukherjee, in one of India’s most-watched policy announcements of the year, failed to deliver any other major incentive for the clean-energy industry.

He did, however, propose an investment of Rs.200 crore (USD40 million) for research into plant and seed varieties with higher yields can resist climate change.

The minister said in his speech that food security and agricultural development in the coming decades would depend upon scientific and technological breakthroughs in raising productivity.

Disappointing many groups was a minuscule bump in the budget allocation for the Ministry of Environment and Forests of just over five percent from Rs.2,491 crore last year to Rs.2,629 crore this year.