January 29, 2025 | 3 min read
How Union Budget 2025 Could Transform India’s Renewable Energy Landscape?
As India approaches the Union Budget 2025, the spotlight intensifies on the nation's renewable energy sector. With a goal of achieving 500 GW of renewable energy capacity by 2030, the forthcoming budget is anticipated to introduce pivotal reforms and incentives to accelerate this green transition.
Here are some of the key expectations of the renewable energy sector.
Enhancing Green Financing and Investment
To meet its ambitious renewable energy targets, India must establish a coherent tax framework that incentivises green investments. Implementing a clear 'climate taxonomy' will define sustainable investments, facilitating easier access to benefits and incentives for qualifying projects. Additionally, offering reduced interest rates on loans for green projects and exemptions from capital gains tax can attract both domestic and international investors. Clarifying the tax treatment of carbon credit trading under the Goods and Services Tax (GST) regime will further streamline financial operations within the sector.
Promoting Research, Development, and Innovation
The renewable energy industry is advocating for policies that bolster research and development (R&D) and innovation. Introducing tax incentives for companies investing in green technologies, such as lower corporate tax rates or complete exemptions, can stimulate domestic innovation. These measures should be strategically phased to encourage sustained investment in green technology development. Furthermore, providing accelerated depreciation benefits for investments in renewable energy equipment can enhance the sector's growth trajectory.
Addressing GST and Policy Reforms
Industry stakeholders are calling for a re-evaluation of GST rates across the renewable energy supply chain. Reducing GST on renewable energy sector’s inputs can lower project costs, making green energy more accessible. Additionally, offering GST exemptions for corporate guarantees used to secure project-specific loans can alleviate financial burdens on developers. Revisiting policies like the Approved List of Models and Manufacturers (ALMM-II) and proposed changes to Power Purchase Agreement (PPA) durations is crucial to ensure they align with the sector's growth objectives and do not inadvertently hinder progress.
Fostering Sustainable Growth
The Union Budget 2025 is expected to prioritise sustainable energy initiatives, including the establishment of a dedicated green energy fund to support hydropower and other renewable projects. This focus aligns with India's commitment to environmental sustainability and the transition towards cleaner energy sources.
By implementing strategic financial incentives, fostering innovation, and enacting supportive policy reforms, the government can accelerate the nation's journey towards a sustainable and green future. These measures will not only help achieve the 500 GW renewable energy target by 2030 but also position India as a global leader in the renewable energy sector.
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