Energy in India

Indian energy sector has grown by leaps and bounds, both in terms of size, coverage and technological sophistication. India has been one of the top performing clean energy economies in the 21st century, registering the fifth highest five-year rate of investment growth and eighth highest in installed renewable energy capacity, according to a research report released by The Pew Charitable Trusts.

The country offers huge growth potential for solar photovoltaic (PV) industry as well. India is endowed with vast potential of solar energy and is quickly developing itself as a major manufacturing hub for solar power plants. Besides, it is expected that, the annual PV-installed capacity will grow at a compound annual growth rate (CAGR) of around 49.5 per cent during 2010-2014 to reach 1,500 megawatt (MW) by the end of 2014, according to RNCOS research report titled 'Indian Solar Energy Market Analysis'.

The Indian energy sector is expected to become at par with the global stipulations on carbon emissions and sustainability through various changes in the current set-up. The launch of Jawaharlal Nehru National Solar Mission (JNNSM) - a joint initiative of the Ministry of New and Renewable Energy (MNRE) and Ministry of Power and the first of its kind in the world-is one of the most important environment-friendly energy solutions available in India.

Power generation and capacity

India's electricity generation capacity will leapfrog to nearly 315 gigawatts (GW) by fiscal year 2016-17 with an estimated investment of about Rs 5 lakh crore (US$ 88.91 billion), according to Shri Jyotiraditya Scindia, Minister of Power.

The present installed capacity of power generation in the country is about 212,829 MW which includes 26,920 MW from renewable sources. This constitutes 12.5 per cent contribution of renewable in the total power generation installed capacity in the country.

The Ministry of New and Renewable Energy has set a target of capacity addition of 29,800 MW from renewable energy sources during 12^th Plan period. This includes 15,000 MW from wind, 10,000 MW from solar, 2,100 MW from small hydro and 2,700 MW from biomass including waste to energy. It is expected that the contribution of renewable power in the total installed capacity would be in the range of 16 to 17 per cent at the end of 12^th Five Year Plan.

Wind energy is also pegged as a key growth driver with the sector targeting 15,000 MW of new capacity in the next five years. India ranks fifth in terms of installed capacity from wind energy projects globally which has reached to 18,522 MW as on 31.01.2013.

• The Ministry of New and Renewable Energy, Government of India has signed a memorandum of understanding (MoU) with the Government of Denmark for cooperation for development of new and renewable energy sector. The cooperation helped in establishment of centre for Wind Energy Technology (C-WET), and establishment of Wind Turbine Testing Station at Kayathar and helped in developing Indian Wind Atlas
• The working group on power for formulation of the 12^th Five Year Plan has estimated total fund requirement of Rs 1,372,580 crore (US$ 244.08 billion) for the power sector. The main sources of financing are commercial banks, public financial institutions, dedicated infrastructure/power finance institutions, insurance companies, overseas markets, bilateral/multilateral credit, bond markets and equity markets
• The Government has set a target of 15000 MW of wind power to be installed during 12^th Plan period. The capital expenditure for setting up one MW wind power project is approximately Rs 6 crore (US$ 1.07 million)
• A Gross Budgetary Support (GBS) of Rs 1521 crore (US$ 270.50 million) has been provided to the MNRE during 2013-14, in comparison to GBS of Rs 1385 crore (US$ 246.31 million) and Revised Estimates of Rs 1150 crore (US$ 204.52 million) during 2012-13, for development and promotion of renewable energy activities
• JNNSM has been launched to facilitate large scale capital investment in solar energy sector; Payment Security Mechanism for grid connected Solar Power Projects under the Mission. The mission aims to generate 20,000 MW of grid-connected solar power by 2022
• The Union Cabinet gave its approval for formation of the special purpose vehicle (SPV) for the Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline project and permitted GAIL India Ltd to join the SPV
• Hydro Projects worth 2,500 MW across various states have been given clearance by the Forest Advisory Committee (FAC) and Ministry of Environment and Forest (MoEF)

• The Ministry of New and Renewable Energy has been implementing broad-based Research, Development and Demonstration (RD&D) Programme on new technologies such as Hydrogen Energy, Fuel Cells, Battery Operated Electric Vehicles, Bio-Fuels, Tidal Energy and Geothermal Energy through research and academic institutions and state nodal agencies for more than a decade
• The Government of Meghalaya is planning a hi-tech, environment-friendly approach to meet the state's power needs besides contributing to the environment through its Meghalaya Renewable Energy Policy
• The Government of Bihar has decided to develop up to 150 MW of solar PV based projects which are to be set up on the chaur/pond where pisciculture is being undertaken. Bihar Renewable Energy Development Agency (BREDA) has been designated as the nodal agency for providing necessary support to facilitate the development of solar PV projects in the state
• The Government has reduced the rate of withholding tax on interest payments on external commercial borrowings (ECBs) from 20 per cent to 5 per cent for three years to provide low cost funds to infrastructure sectors including power
• To promote solar power for off-grid applications for both thermal as well as photovoltaic, the Government is offering financial support through a combination of 30 per cent subsidy and/or 5 per cent interest bearing loans for companies in the business
• To attract investments to energy projects that are capital-intensive, such as power generation plants and hydrocarbon blocks, the budget allowed for deduction of investment allowance of 15 per cent on investments of Rs 100 crore (US$ 17.78 million) or more in plant and machinery during 2013-14 and 2014-15

Investment policies have been initiated to boost investments through regulated means. These include:

• 100 per cent FDI under the automatic route in the power sector
• FDI up to 100 per cent under the automatic route is permitted for oil and natural gas exploration activities, infrastructure for marketing of petroleum products, petroleum product pipelines and natural gas LNG pipelines
• FDI up to 49 per cent is permitted under the Government route in petroleum refining in the private sector
• 100 per cent FDI into renewable energy through automatic route has been allowed by the Government

Source: Consolidated FDI Policy, Department of Industrial Policy & Promotion (DIPP)

The Ministry is also encouraging setting up of power generation projects from biomass through various technological routes such as combustion, gasification and cogeneration. MNRE has proposed to continue various fiscal and financial incentives during 12^th five year plan such as capital subsidy linked with capacity and fiscal incentives such as concessional customs duty on import of machinery and components, excise duty exemption, accelerated depreciation on major components and relief from taxes which are provided for setting up of biomass based power projects.