The ease of doing business in India’s renewable energy sector needs to improve and the federal and provincial governments have to devise uniform guidelines and rules to encourage project development

A solar power plant in Gujarat. (Photo by Mark Garten)

A solar power plant in Gujarat. (Photo by Mark Garten)

India is in the midst of one of the largest transformation in the energy sector through its ambitious renewable energy (RE) programme. Considering the policy reforms already put in place, the country is ranked fifth in the world in a list of 30 countries as per the Climatescope report published by Bloomberg New Energy Finance in 2015. The report identifies enhanced opportunities of deployment of RE in the country under the present government.

However, the weakest area has been investment flows into the sector. Investor confidence in the RE sector has been marred by complicated regulatory framework and policies at the state levels. Since energy is a concurrent subject in the country, the growth and deployment of the sector depends mostly at the states’ support, which is till now not uniformly encouraging. To ensure greater investment flows in the sector, the government of India under the aegis of its Department of Industrial Policy and Promotion (DIPP) in the trade ministry has carried out strategic interactions with stakeholders to identify the areas of intervention for the RE sector.

Land policies

A major bottleneck has been observed in the form of land-related policies across different states of India. It has been observed that different states have different policies and mechanisms to allocate and procure land for RE installations. This is a major challenge for an investor as he has to comply with a number of different sets of rules, which increases transaction costs.

“Since each states has its own land procurement and allocation policies, the compliance of each of them for a company like Hero increase the costs of deployment substantially,” says Sunil Jain, Chief Executive Officer of Hero Futures Energy Group. Industry leaders have argued for standardised norms of compliance for the RE sector across the states of India. Furthermore, the issue becomes complicated with the special norms of coastal zones and other protected area related issues.

Charges on RE electricity

The states have also imposed various levies and surcharges on RE when it is fed to the grid. According to industry representatives who attended the DIPP meeting, wheeling charges, surcharges to feed to the grid, transmission charges between two states and charges on banking facility imposed by the states acts as negative incentives for the developers.

It has also been pointed out that the poor infrastructure around transmission of RE power has to share much of the burden for the slow integration of RE in the grid. Initiatives like Green Corridor and grid integration initiatives undertaken by the Ministry of Power has to be rolled out at the state levels, which is yet to take off. Sumant Sinha, Chief Executive Officer of ReNew Power, has observed that with the industry being able to raise money from the private resources, the government should undertake regulatory measures to thrash out the current bottlenecks around grid integration norms and fix the responsibilities of transmission companies to develop the infrastructure through private-public partnership. A clearer roadmap on the firs and second phases of the Green Corridor initiative would “have helped the developers to plan their projects well in advance to minimise the costs,” says Jain.

The RE sector is plagued by low manufacturing activity. Industry stakeholders say that a robust RE sector requires strong manufacturing facilities in the country. Currently, there are a number of issues that are of concern for the manufacturers. First, cheap Chinese materials have flooded the Indian markets, driving the costs down substantially. Furthermore, the standards and specifications on solar cells do not ensure that the best quality products are used, some manufacturers say. Even if the Indian products are durable, the comparatively higher price does not allow the products to be used by project developers.

Way forward

First and foremost, the government should take help of applications based on information and commununication technologies (ICT) in the areas of accessing permits and no-objection certificates. In the land sector, the government should encourage the states to go online in filing of the application for land and also follow standardised norms across the states. It would be helpful if the government proposes that the states adopt a common guideline on land allocation for the RE projects along with the online application process, sector participants said.

Secondly, there are permissions required for transporting RE goods (especially wind turbine components) across the states. Currently, a developer has to get this from each transport authority it passes through while transporting the goods to the site. In this regard, Deepak Puri, chairman and Managing Director Moser Baer India, has asked the government to “ensure single window facility that will ensure hassle-free movement.”

It has been observed that the states follow multiple levy routes to a land allocated for RE development. Currently, the forest department and the land revenue departments charge separate levies for an alloted land, coastal zone and other related charges apply for wind power projects and so on. This discourages project developers to a large extent as it increases the transaction cost of a deal.

The states and centre must come together to formulate a common code for transmission and distribution network. In a recent development, the Ministry of Power has called all state transmission and distribution companies to submit their proposals in this regard. There is yet to be any mvement on this front. Furthermore, projects developers want to be apprised of the government’s plans around the Green Corridor project. “A roll out plan for the Green Corridor would have helped the RE growth but the lack of strategy in putting in place the plan is major concern,” Jain of Hero Futures Energy.

Finally, rationalisation of duties and tariffs on the import of RE products to ensure high quality is key to sustain the growth of the RE sector in the future. In order to meet the 2022 and the 2030 goals, a roadmap for deployment is key and the states need to be encouraged to remove regulatory bottlenecks. In order to achieve the triple of objectives —energy security through Power for All, RE goals of 2022, and achieve emission intensity targets — the government has to step up second-generation reforms in the energy sector.

The DIPP is in the process of collating the feedback from industry to ease out these bottlenecks in the RE sector. Since these changes require substantial cooperation between the states and the centre, they might take some time. The only way to resolve the issues is to make the states aware of the benefits of deploying renewable energy projects.

 

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