Energy in India

The energy sector in India has grown by leaps and bounds, both in terms of size, coverage and technological sophistication. India stands among the top five countries of the world in terms of renewable energy installed capacity and at present renewable power, with over 26 gigawatt (GW) installed capacity, represents about 12.5 per cent of the total installed power generation capacity in India, according to Dr. Farooq Abdullah, Union Minister of New and Renewable Energy. He further said that India aims to achieve about 55 GW of renewable power by 2017.

According to RNCOS research report titled, 'Indian Solar Energy Market Analysis', the country portrays unlimited growth potential for solar photovoltaic (PV) industry in future. 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.

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.

Jawaharlal Nehru National Solar Mission (JNNSM)

JNNSM aims to facilitate the installation of 20 GW grid-connected and two GW off-grid solar power, 20 million sq. m of solar thermal collector area and 20 million rural households with solar home lighting by 2022. Implementation of the Phase-I of the mission started during 2011, which is planned to be completed by 2013 only. Further, the remaining two phases scheduled to be completed by 13^th five-year plan.

The target of JNNSM is to promote grid-connected solar power in a big way with the objective to bring cost of solar power generation to grid parity levels. The immediate aim of the Mission is to focus on setting up an enabling environment for solar technology penetration in the country both at a centralized and decentralized level.

Power generation and capacity

A total power generation capacity of around 26,267 MW from renewable energy has been set up in the country as on October 31, 2012. The sector will add nearly 45,000 MW to its total installed capacity by 2013-14 to the existing production, according to a RNCOS research report, 'Indian Power Sector Analysis'

In the 12^th Plan period, a target of adding about 30,000 MW from various renewable energy sources has been fixed. The Ministry is also supporting research in various renewable energy technologies for improvement in efficiency, reduction in cost and to develop new applications.

Further, wind power is also the fastest growing renewable energy sectors in India. The country is the fifth largest in the world in terms of wind power installed capacity. As on March 31, 2012, the total capacity of around 17,365.03 MW of wind power has been installed in India.

Natural gas is also expected to play a key role in India's energy mix by 2025, increasing to 20 per cent. The country produced 7,404.8 million cubic metres (MCM) of natural gas during April-August 2012, as per the provisional data provided by the Ministry of Petroleum and Natural Gas.

• The Cabinet Committee on Investment has cleared the proposal from Ministry of Power for setting up three 660 MW power plants under North Karanpura Super Thermal Power Plant (NKSTPP) by the National Thermal Power Corporation (NTPC) in Jharkhand
• Five auto component companies in Chennai - Rane Group, MM Forgings, Super Auto Forge, Natesan Industries and Auto Parts - are setting up a solar power plant in Tamil Nadu. The solar farm, with an installed capacity of seven MW, could entail a total investment of Rs 70 crore (US$ 12.93 million)
• 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
• The Government of India to develop 54 cities as solar cities. The draft master plans have been prepared for 28 cities, out of which 8 have been approved by the Ministry of New and Renewable Energy (MNRE) for implementation
• The Working Group on Power for formulation of the 12th five year plan has estimated total fund requirement of Rs 13,72,580 crore (US$ 253.65 billion) for the power sector during the 12^th Plan. The Working Group has estimated an investment requirement of Rs 6, 38,600 crore (US$ 118.03 billion) for the generation sector, Rs 1, 80,000 crore (US$ 33.26 billion) for transmission and Rs 3, 06,235 crore (US$ 56.59 billion) for the distribution sector

• The Ministry of New and Renewable Energy has come out with proposed norms for viability gap funding (VGF) for large-sized solar power projects that would come up in Phase II of the National Solar Mission. VGF will be made available for certain specified capacity solar projects - say, 750 MW or 1,000 MW - according to the draft policy document on National Solar Mission, Phase II
• The World Bank has agreed to make available US$ 200 million line-of-credit to India Infrastructure Finance Company Ltd (IIFCL) for lending to solar power projects in India. This will pave the way for cheaper loans for solar projects
• 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
• The Government of India has proposed incentives of up to US$ 0.258 per kilowatt hour for power plants, 10-year tax holidays, electricity tariff exemptions and other preferential tariffs. There are also subsidies for solar power systems and small hydro power projects

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.