Budget 2016: Renewable energy sector seeks VAT exemption on solar equipment, tariffs

This time when Finance Minister Arun Jaitley will present Budget 2016-17 on February 29, the renewable energy sector will be pinning hopes as they have sought VAT exemption and incentives for solar parks.

The solar industry has demanded a sovereign fund to back dollar-denominated solar tariffs, solar equipment exempted from value added tax (VAT) as well as stability in wind power policies from Jaitley.

FICCI maintained that solar parks should be exempted from MAT.

"Solar parks should be treated at par with special economic zones (SEZs) and minimum alternate tax (MAT) exemption may be provided to power projects within solar parks," FICCI’s pre-budget memorandum stated.

The industry body has also sought 2% export incentive that was given for solar components until last year but now is restricted to Category B countries.

Renewable energy projects have the benefit of accelerated depreciation (AD) by which developers are allowed to claim 90% depreciation in the first year of functioning itself.

Experts say the dollar-based solar tariff fund would be huge for foreign investors worried about the depreciating rupee.

Meanwhile, solar manufacturing has a different view.

"The simple problem with solar cell and module manufacturing in India is that it is not competitive," Jasmeet Khurana, associate director consulting, Bridge to India, told ET, adding “making them cheaply and well depends on scale, access to cheap capital, vertical integration with access to cheap and reliable energy and a level playing field against other Asian manufacturers. None of these are available in India."