Budget 2010-11 and clean energy sector

Well this blog entry is long overdue; I have been meaning to write about the positive impact that the 2010-11 Budget may have on the clean energy sector for a while.

The Finance Bill 2010-11 has created a corpus called National Clean Energy Fund, which will invest in entrepreneurial ventures and research in the field of clean energy technologies. The money for this will be garnered through a so-called ‘clean energy cess’ — Rs 50 on every tonne of coal, both domestic and imported. A back-of-the-envelope calculation indicates a sum of Rs 25 billion. In addition, inputs for products such as solar energy panels and wind turbines have been showered with tax sops, while machinery used for setting up photovoltaic and solar thermal power units have been offered a concessional customs duty of 5% and exempted from excise duty. Some inputs needed for the manufacture of rotor blades for wind energy generators have also been exempted from excise duty.

So here are some key points that may have a positive spin-off on clean energy sector…
- National Clean Energy Fund for funding research and innovative projects in clean energy technologies to be established.

- Concessional customs duty of 5 per cent to machinery, instruments, equipment and appliances etc. required for the initial setting up of photovoltaic and solar thermal power generating units and also exempt them from Central Excise duty. Ground source heat pumps used to tap geo-thermal energy to be exempted from basic customs duty and special additional duty.

- Central Excise duty on LED lights reduced from 8 per cent to 4 per cent at par with Compact Fluorescent Lamps.

- To remedy the difficulty faced by manufacturers of electric cars and vehicles in neutralising the duty paid on their inputs and components, a nominal duty of 4 per cent on such vehicles imposed. Some critical parts or sub-assemblies of such vehicles exempted from basic customs duty and special additional duty subject to actual user condition. These parts would also enjoy a concessional CVD of 4 per cent.

- Plan allocation for power sector excluding Rajiv Gandhi Gramin Vidyut Yojana (RGGVY) doubled from Rs 22.3 billion in 2009-10 to Rs 51.3 billion in 2010-11.

- Plan outlay for the Ministry of New and Renewable Energy increased by 61 per cent from Rs 6.2 billion in 2009-10 to Rs 10 billion in 2010-11.

- Solar, small hydro and micro power projects at a cost of about Rs 5 billion to be set up in Ladakh region of Jammu and Kashmir. Restore the basic duty of 5 per cent on crude petroleum; 7.5 per cent on diesel and petrol and 10 per cent on other refined products. Central Excise duty on petrol and diesel enhanced by Re.1 per litre each.