India diverts Rs 56,700 crore from the fight against climate change to Goods and Service Tax regime

India’s biggest domestic source of public funds to push renewable energy and protect the environment has become a victim of the Goods and Services Tax.

In April, the government included the tax collected on production and import of coal to the GST schedule. With this move, the tax, which was funelled into the National Clean Energy and Environment Fund, was diverted to compensating the states that stand to lose revenue as a consequence of the GST.

Now, the finance ministry’s responses to’s queries under the Right To Information Act, 2005, show even the unspent funds lying in the National Clean Energy and Environment Fund have been diverted.

The unspent funds amount to Rs 56,700 crore.

A steady stream of funds for clean energy, amounting to more than Rs 1 lakh crore over next five years will also dry up from next financial year. Indeed, from next year, India will not have the National Clean Energy and Environment Fund.

Basically, the fund is now dead wood,” a senior finance ministry official said. The concept of non-lapsable pool is a misnomer in the Indian system. We have several such funds with dedicated purposes. But there are so many demands on our limited resources and a reassessment of priorities is done each year. The money collected so far in the clean energy fund and remaining unspent will go towards compensating states.” The official did not want to be identified.

Generally, such dedicated funds linked to a specific cess are classified as “non-lapsable”. If the cess collected in a financial year remains unspent by the end of the year, it is retained separately for future use against the specific purpose. It cannot be subsumed into the general pool of revenue for the central government to use at its discretion. But the Bharatiya Janata Party-led government has decided to use the unspent money from the clean environment fund for other purposes.

The resulting hit to the Indian impetus towards a greener economy will be huge. Apart from the Rs 56,700 crore already collected but not spent, Rs 29,700 crore was expected to be collected through cess in 2017-’18. That is more than double the budget of the Narendra Modi government’s flagship Skill India Mission.

“Morally, this [diverting coal cess to GST implementation] is not correct,” said Rita Pandey, environmental economist and professor at the National Institute of Public Finance and Policy in New Delhi. “A cess drawn from one sector cannot be earmarked for another. A cess on coal has to be ploughed back into the energy sector. The decision shows the government’s inability to manage this fund. We have argued in the past that apart from funding the renewable energy sector, the coal cess should be used to support innovation in the clean coal technologies as well.”

Clean-up act

The coal cess, also known as the Clean Energy Cess, and the linked fund were created in 2010 by the Congress-led government, which imposed a cess of Rs 50 per tonne to begin with. The idea was simple: the government taxes production of coal because burning coal leads to increased emissions of carbon dioxide gas, which is the biggest culprit causing climate change. By putting an additional tax on coal, the price of dirty energy goes up. This gives renewable and clean energy a level field to compete financially against fossil fuels. Fossil fuel prices have traditionally remained low because governments do not include the cost of consequent air pollution and public health crisis when determining the selling price of these fuels. The cess would not only increase the price of coal, the previous government had decided, the fund created from it would be used to support research and development of clean technologies.

When the BJP-led government took office, it raised the cess from Rs 50 to Rs 100 per tonne in 2014. The rate was doubled to Rs 200 per tonne in 2015 and to Rs 400 in 2016. This won the government praise from environmentalists globally and helped it claim pole position at the Paris climate change negotiations as well. Naturally, the clean energy fund kitty swelled rapidly with the eight-fold increase in cess over just three years. By the beginning of this financial year, the government had collected a humongous Rs 56,740 crore. That’s more than 20 times the current budget of the Ministry of Environment, Forests and Climate Change.

But here the story takes an unfortunate turn.

Of the total cess collected from 2010 to 2017, the government allocated only 37% to the National Clean Energy and Environment Fund. It spent even less – under 30% – on clean energy and environmental projects. The rest lay unused.

In response to RTI applications by, the finance ministry said:

“The GST provides that coal cess, along with some other cess…would constitute GST compensation fund and the same would be utilised to compensate the states for five years for potential losses on account of GST implementation. After five years any amount left would be shared on 50% basis between the Centre and states.”

What could be the consequences of this decision? “There are about 55 ongoing projects that were being funded through the fund,” the finance ministry official explained. “To keep them going we shall have to allocate money from the general revenue pool. But this fund for now is over. After five years the government can rethink if it wants to spend 50% of the cess collected again for renewable energy and environment. But that is then. Five years is a long time.”

Bleak outlook

This is not the first time the government has tinkered with the logic behind creating the fund, though earlier it was mere tinkering. In the 2016-’17 budget, it renamed the Clean Energy Cess as Clean Environment Cess, and in March this year the linked Clean Energy Fund was renamed Clean Energy and Environment Fund. This was done to fund a host of other categories of projects apart from clean energy – nuclear energy projects under the Department of Atomic Energy, green technology in the Smart City Mission, Ganga rejuvenation, and drinking water and sanitation, among others.

As it stands, the death of the fund next year will pose the biggest challenge to the Ministry of New and Renewable Energy. In this financial year, the fund provides over 98% of the ministry’s budget and greatly helps meet India’s commitments in the Paris Climate Agreement. An end to this fund will require the government to finance the works of the renewable energy ministry from its general corpus of revenue. In the three years of the existence of the fund, the government needed to provide only about Rs 800 crore to the ministry from this general corpus.

The impending loss of the fund has the ministry worried. “The Department of Expenditure, Ministry of Finance, has informed that in view of the implementation of GST…the fund may not be available from NCEF to finance RE projects,” the ministry informed the Parliamentary Standing Committee on Energy in March, referring to renewable energy. The committee noted that unless additional allocation was made to the ministry, implementation of its various programmes “will be seriously affected”.

In the past, critics of the clean environment cess and its linked fund argued that the government did not have the capacity to use the large sums coming in. However, the ministry’s data shows the spending capacity actually improved over the last two years, when the government expanded the scope of the fund’s utilisation – 100% of the money was spent.

India has for long argued at international forums that the developed world is obligated to provide public funds to poor countries to fight climate change. But after the United States walked out of the Paris Agreement this year, New Delhi reiterated its commitment to the global agreement and declared that it would do so by using its own resources if the global community fails to meet its obligations. With the US reneging on its commitments, the clean energy fund would have come in handy when India starts to meet its targets under the agreement in 2020. But in the implementation of the GST, the country’s fight against climate change has become collateral damage.

Source: SCROLL

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India energy ministry plans 7.5 GW support program for domestic solar manufacturing

The Ministry of New and Renewable Energy has initiated the second phase of its CPSU program to provide installation capacity totaling 7.5 GW of solar projects made using domestically manufactured solar cells and modules.

Greater attention is to be given to boosting and supporting India’s domestic solar PV manufacturing industry following the news that the Ministry of New and Renewable Energy (MNRE) is to introduce a scheme designed to support the installation of 7.5 GW solar capacity using home-made components.

Under proposals for phase 2 of its CPSU Program, the MNRE has outlined plans to support wherever it can the domestic manufacturing solar sector in India. Faced with an impending anti-dumping case against Chinese, Taiwanese and Malaysian solar cells – but also recently having fallen foul of World Trade Organization (WTO) rules on its imposition of a Domestic Content Requirement (DCR) – the government has to chart a very careful path between protectionism and the free market.

Hence, the MNRE’s proposal in a report titled National Solar Mission – An Appraisal, presented during a Lok Sabha committee meeting on energy late last week, comprehensively lays out the ministry will tackle these challenges facing the sector.

Chiefly, the overall aim is to support existing PV manufacturers in India to enable them to compete against foreign suppliers. The difficulty here is simply a matter of cost: Chinese solar modules are much cheaper than those produced domestically, so MNRE is to run a cost analysis looking at where the price differentials lie across the production chain, and hopefully identifying ways to bridge these gaps.

The creation of a captive market is key, believes the MNRE, to boosting domestic capacity, and so a scheme to ringfence 7.5 GW of solar installations to be built using only Indian-made solar cells and modules has been submitted and is currently under proposal. This would include a rooftop element requiring the use of domestic modules for projects installed under the CFA/Incentive.

Perhaps most tellingly, the MNRE will also incentivize the creation of fully vertically integrated, state-of-the-art solar PV manufacturing facilities in India – the lack of which has for too long held back wider acceptance of Indian-made solar components.

This plan will involve “working at encouraging development of world-class facilities” by “addressing the issues of technology obsolescence and fragmented, small-scale operations that are the major challenges currently being faced by the domestic solar PV manufacturing industry in India”, said the MNRE.

The main vision is to build an infrastructure that is globally competitive and able to supply a vital component to India’s energy security. To achieve this, the MNRE is considering a study on the critical elements involved in the entire solar production chain, the optimum scale of operation and the overall cost structure of such production facilities.

“This may be the answer to avoid a disruptive anti-dumping tariff imposition by providing a market for domestic manufacturers – if this proposal can get approved,” said Raj Prabhu, CEO of Mercom Capital Group. “However, it needs to be done in a way that does not violate the WTO ruling and the CPSUs will have to actually auction and procure solar through DCR, even though these projects will be expensive compared to Non-DCR projects.”

So far, the MNRE has allocated just over 1 GW of solar capacity under phase 1 of the CPSU Program, with around 445 MW of capacity already commissioned.

Source: PV Magazine

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Major relief for solar power developers: Projects deadline extended

Major relief for solar power developers: Projects deadline extended

The government has granted major relief to solar power developers, allowing deadlines for project development to be extended in cases where there were delays caused by circumstances beyond their control.

Developers had raised an alarm over a letter from the Ministry of New and Renewable Energy (MNRE) this month directing all states to strictly enforce deadlines for solar projects, eschewing extensions, as reported by ET on July 18. The ministry has now sent another letter that takes into account the concerns raised.

“If there are delays of any kind on the part of the state government … like land allotment, transmission or evacuation facilities, connectivity permission or force majeure, the competent authority in the state may consider providing extension of the time duration,” the letter dated July 28 said. Both letters are written by Dilip Nigam, an adviser to the National Solar Mission at the ministry.

Solar tariffs have fallen dramatically in the last two years, from around Rs 7-8 per unit in mid-2015 to aroundRs 2.50-3.50 at present, mainly due to a steep decline in the cost of solar cells and modules caused by global overproduction, especially in China. The MNRE was concerned that solar developers who had won projects earlier at relatively higher tariffs — when equipment costs were also high — might delay their purchase of solar equipment to benefit from falling prices and thereby reap windfall profits.

“One of the reasons for falling tariffs is lowering of prices of solar cells/modules internationally,” the first letter, dated July 3, said. “Falling prices may give undue benefits to developers at the cost of the government if project duration is extended… It is important that already awarded projects are completed on time.”

Power purchase agreements (PPAs) usually include severe penalties for failing to complete a project on time, but these are frequently not enforced and developers given extensions should they ask for them.

The letter evoked strong protests from developers who pointed out that project delays were often due to lapses on the part of the state government or the concerned power distribution company. They even feared the letter could be used by state discoms to renegotiate PPAs, citing the fall in equipment prices.

The second letter has made it clear that if a state government was culpable for any delays, the developer should not be made to pay for it. “It is clarified that the ministry had requested not to give time extension (only) if all the obligations are fulfilled by the concerned state government in a project,” it said.

Source: ET

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In a first, Madhya Pradesh takes away must-run status of renewable projects

The state would now have the freedom to back down from renewable projects whenever it wishes to…..

The flag bearer of headline renewable energy growth, Madhya Pradesh, in a latest amendment has suggested taking away the “must-run” status of renewable and co-generation

In the latest order by the Regulatory Commission (MPERC), it has asked the “the generation from co-generation and renewable sources of energy to be subject to ‘scheduling’ and ‘merit order dispatch principles’ as decided by the commission from time to time.”

The order pertains to the amendment in the Regulatory Commission (Cogeneration and Generation of from Renewable Sources of Energy) (Revision-I) Regulations, 2010. It would hold a public hearing to discuss the matter on August 18.

Sector and legal experts said this would harm the renewable energy projects, as the state would now have the freedom to back down from these whenever it wished to. Renewable power enjoys a “must-run” status across the country to ensure its integration in the grid and better returns to the developers.

would now run with even more ambiguity. In the states where forced backing down is being done, developers have approached the regulatory commissions. But in this case, the regulator has paved the way for backing down renewable. It should ideally have a must-run status given its infirm nature,” said a senior sector executive.

Legal experts said no Indian state has till yet removed the must-run status of renewable energy and this would set wrong precedent.

“The proposed amendment will have adverse impact on RE Projects in the state of The commission should be conscious of the fact that the renewable energy is not available all the times and plants are dependent on the nature for generation of the power, therefore removing must run status will lead to further uncertainty. The commission should introduce the concept of ‘deemed generation’ before introducing merit order dispatch principles. Solar PPA has such concept,” said Aditya K Singh, advocate, Arthe Law.

Source: BS

Click here for the Seventh Amendment MPERC RE removing Solar Must Run Status

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Initiation of Antidumping investigation concerning imports of “Solar Cells whether or not assembled partially or fully in modules or Panels or on glass or some other suitable substrates” originating in or exported from China PR, Taiwan and Malaysia.

F.No. 6/30/2017-DGAD : Indian Solar Manufactures Association (hereinafter referred to as the petitioner) has filed an application before the Designated Authority (hereinafter also referred to as the Authority) in accordance with the Customs Tariff Act, 1975, as amended from time to time (hereinafter also referred to as the Act) and Customs Tariff (Identification, Assessment and Collection of Anti-Dumping Duty on Dumped articles and for Determination of injury) Rules, 1995, as amended from time to time (hereinafter also referred to as the Rules) for initiation of anti-dumping investigation and imposition of anti­ dumping duties concerning imports of ‘Solar Cells whether or not assembled in modules or Panels or on glass or some other suitable substrates’ (hereinafter also referred to as subject goods), originating in or exported from China PR, Taiwan and Malaysia (hereinafter also referred to as the subject countries)

  1. And whereas , on finding prima facie that evidence of dumping of the subject goods originating in or exported from the subject countries, injury to the domestic industry and a causal link between the said dumping and injury exists to justify an initiation of anti­ dumping investigation; the Authority hereby initiates an investigation into the alleged dumping, and consequent injury to the domestic industry concerning imports of the subject goods from subject countries in terms of Rule 5 of the Anti-Dumping Rules, to determine the existence, degree and effect of alleged dumping and injury to recommend the amount of antidumping duty, which if levied, would be adequate to remove the injury to the domestic industry.
  • Product under consideration
  1. The product under consideration in the present investigation is ‘Solar Cells whether or not assembled partially or fully in Modules or Panels or on glass or some other ( suitable substrates’ (hereinafter referred to as Subject goods for the sake of brevity) originating in or exported from China PR, Taiwan and Malaysia.
  2. Solar cell is a solid state electrical device that converts sunlight directly into electricity by the photovoltaic To make the practical use of solar cells, the same is placed in panels or modules or on glass or some other suitable substrates. A solar panel/module is a packaged, connected assembly of solar cells. Thin films are also panels/modules. Scope of Product Under Consideration covers cells, modules and thin films.
  3. Solar cells are also known as Photovoltaic Cells in the market parlance. Photovoltaic technology enables direct conversion of sun light into electricity and to make the practical use of photovoltaic technology, solar cells/modules or panels are produced and the same is predominantly used in solar power plants to generate el Solar energy conversion into electricity takes place in a semiconductor device which is known as a solar cell. A single solar cell is a unit that delivers a certain amount of electrical power in terms watt and in order to achieve a particular amount of wattage,number of solar cells have to be connected together to form a solar panel,also called as PV module. For large­ scale generations of solar electricity, the solar panels are connected together into a solar array.
  4. There are two major technologies available for manufacturing of subject product as submitted. They are:(1) Crystalline Silicon (c-Si) based solar cell technology which is also known as wafer based technology and (2) Thin film The thin film technology may also use, Amorphous Silicon, Cadmium Tellurium (CdTe) or Copper Indium Gallium Selenium as semiconductor materials. Solar cells of both c-Si Technology and Thin  Film Technology  have  been  imported  into  India.    The  product  under consideration (PUC) includes solar cells produced through both the technologies i.e. crystalline technology and thin film technology.

Click here for the documentSOLAR CELL Initiation Anti Dumping Duty

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GST Cell in MNRE

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Solar power tariff has hit an all-time low of Rs. 3.47 per unit in Tamil Nadu, TANGEDCO receives bid for 1500 MW

Solar power tariff has hit an all-time low of Rs. 3.47 per unit in Tamil Nadu. The tariff has gone below Rs. 3 per unit in many states, but this is the first time that a prospective investor has bid so low in Tamil Nadu.

As Tangedco opened bids for installation of 1,500MW solar power parks for 2017-18 on Friday , Bengaluru-based Raasi Green Earth Energy bid at Rs. 3.47 per unit to set up a100MW project. This is a steep fall from Rs. 7.01 per unit that was prevalent in the state in 2015-16.The tariff was hovering in the region of Rs. 4.5 per unit last year.

Tangedco has received bids for more than 3,400MW now.The Tamil Nadu Electricity Regulatory Commission (TNERC) has fixed a tariff of Rs. 4 per unit for this year.

The lowest solar power tariff in the country is Rs. 2.44 per unit in Rajasthan. But in all other states, either the land cost is cheap or land is being given by the state government or the discom itself.

“We will negotiate with other bidders to bring down their rates. Only those that match our conditions will be considered,” said a senior Tangedco official.

“NLC has bid for the entire capacity of 1,500MW . After the lowest bid was known, NLC has expressed its willingness to match it. They propose to set up the park in land reclaimed from mines,” said the official.

Rassi Green is headed by G Narasimhan, a former TMC MP from Krishnagiri constituency. “We came to know that our bid is the lowest. We plan to set up 100MW capacity at Paramakudi in Ramanthapuram district, where we have land,” Narasimhan told TOI.

Apart from acquiring land, the companies face problems in sourcing funds from banks and financial institutions because of high cost of funding.”Funds are available for solar projects in foreign countries at 4% to 5%. In India, it is 9%. Only the State Bank lowered the interest rate recently to 8%,” said Narasimhan, who also heads the Solar Power Companies’ Association.

With the introduction of GST, the cost of setting up solar power projects is set to increase.

“GST rate is 5% for solar modules. It sounds reasonable and consistent. But it was 0% earlier. The GST for engineering and construction services is fixed at 3%. The impact on investments is still not clear.Our current estimate is that the total project capital cost may rise by about 4%,” said a power expert.

Source: TOI

Posted in DISCOM, Greenhouse Gases, GST, India, Pollution, Renewable Purchase Obligation, Renewables, Solar, Tamil Nadu | Tagged , , , , , , , , | Leave a comment
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