Year 2003 was a mixed bag of results.Though most stakeholders seem satisfiedwith the progress achieved in 2003 in

terms of capacity added, on the RE policy front,things were a little bit disappointing. About 400MW capacity was added during the year, thebulk of it in wind energy, small hydroelectricand biomass/cogeneration. "The year 2003 rep-resents a golden era in the history of deploymentof RE-based power projects in the country,"claims Rakesh Bakshi, Chairman, RRBConsultants and Engineers, a prominent windenergy company. The sector received a boost bya special allocation of Rs 200 million (caEuro3.5 million) to the Council for Scientific

and Industrial Research (CSIR) for launchingincentive-driven research in the fields of solarenergy, wind turbines, and hydrogen as alterna-tives to fossil fuels. This, hopefully, should give apush to innovation efforts in the sector. Also,moves such as further interest rate cuts, andincreases in power tariffs in most states, came asa shot in the arm for RE projects and promoters.

However, the much-awaited Electricity Act2003, which was passed by the Parliament,dampened the sentiments of most RE stake-holders. Though the Act has several provisionsindirectly favourable to RE power includingrural electrification, and open access systems, itspecifies no mandatory requirement to source

clean power. The RE sector had expected thatthe Act would empower the state regulatoryagencies to promote RE and coerce the powerutilities to source about 10 per cent of electrici-ty from RE sources. "The RE community clear-ly missed an important chance to have RE pro-motion directly included in the Bill itself",claims a senior government official soundingdisappointed. On the budgetary allocationfront, the last year witnessed an allocation ofjust Rs 10.8 billion to the Ministry of Non-con-ventional Energy Sources (MNES), the one-of-its-kind ministry responsible for promotion andcommercialization of RE in India. Though thiswas about Rs 2 billion more than the previousyear's budget, it was in no way comparable tothe budgetary allocation of Rs 146.7 billion forthe Ministry of Power.

Wish list for 2004The overwhelming verdict for 2004 is that theyear may not be a watershed promising a bigchange, but things would largely remain posi-tive and stable. "The current policy regimeseems to be stable in the short run, which meansthat in the coming year, the sector will grow atits natural pace", says V. Raghuraman, SeniorAdvisor (Energy), Confederation of IndianIndustry. Estimates predict addition of newrenewable capacity to the tune of 500 MW in2004, in comparison to the 400 MW that wasadded in 2003. In particular, the wind and solarsectors exude a lot of hope and optimism.

RE policyAs always, the wish list for the New Year isextensive. The highest priority of those in the

22 reFOCUS January/February 2004 1471 0846/04 ©2004 Elsevier Ltd. All rights reserved.

Developing Countries

How will the year 2004 progress for renewable energy (RE) inIndia? Will the long overdue national renewable policy becomea reality during the year? Will this year's Budget provide somespecial sops for renewable development? Will the budgetaryallocation increase incrementally? Will we see more statescome up with favourable policies towards RE? Or will the sec-tor see another year of mediocre progress? Sunil Puri, Refocuscorrespondent India, tried to gauge the mood of the industryand its expectations at the onset of the year.

RE ININDIAWhat does 2004 have in store?

Renewables in India in 2004. Watershed year or business as usual?

About the authorSunil Puri is a post graduate in energystudies from the Indian Institute ofTechnology, Delhi, and an MBA in financefrom International Management Institute,Delhi. He also works with WinrockInternational India, New Delhi, asProgram Manager (Outreach). The viewsexpressed in this article are of the authorhimself, and need not necessarily reflectthe views of Winrock International India.Contact: sunil_pr@hotmail.com

www.re-focus.net January/February 2004 reFOCUS 23

Developing Countries

sector is a "uniform RE policy". But sadly, notmany in the industry feel that the NationalRenewable Energy Policy would see the light ofthe day in 2004. In fact, the much-touted pol-icy, which is expected to provide a major thrustto RE by way of mandated generation targetsand fossil fuel levies has been in the making forover eight years, and is still nowhere in sight. InIndia, power is a concurrent subject (both cen-tre and state govern the policies, and none over-rides the other) and therefore the role of thestate government and the state regulatory agen-cies is very important, though the growth ofrenewables is mainly driven by central policies.The centre has, from time to time, come outwith favourable policy notifications, but thestate regulators (who can enforce implementa-tion of policies at the state level) have rarelyshown a sympathetic attitude towards renew-ables. Besides, the absence of legislation for themandatory purchase of renewable power,absence of a green power market, and financial-ly weak utilities are some of the barriers the reg-ulators face while promoting renewable power.

The lack of a macro policy is certainly disap-pointing. "We have world-class technologywith us in the renewable sector in India.Financing is not a problem as both national aswell as international financing is available.However, the absence of a National Policy isproving to be the vital missing link. This isstunting the growth of this sector," lamentsBakshi. It is felt that a clear policy at the centrallevel would certainly fill up the gap in terms ofregulatory procedures, private investmentnorms, mandatory obligation of utilities to pro-mote RE projects, and setting remunerative tar-iffs in addition to creating more awarenessabout the benefits of renewables. HemantLamba of Auroville Renewable Energy(AuroRE) attributes this slackness to the "lackof farsighted policy-makers to make the policiesand spell out the visions". Harish Hande, VicePresident, Selco India, a solar lighting major,feels that the government's seriousness in for-mulating the policy could be debatable.

Experts ask for a consistent State ElectricityBoard (SEB) policy on renewables, and feel thatit is high time RE is given infrastructure status.They also ask for better micro credit policy at theend level (such as rural consumers). "The out-reach of IREDA is much below the requirement.All banks and financial institutions can beencouraged to lend for RE projects and the aidcomponent can be refinanced by the central gov-ernment or IREDA," says Raghuraman. "A sep-arate portfolio should be created within thefinancial institutions for financing renewableprojects" feels Hande. He adds: "such a movewill certainly help electrify more rural areas inthe country". Another area of concern is theslow development of the hydroelectric sectordespite huge potential. "Small hydro is presentlynot eligible for depreciation benefit as applicableto all other renewable energy sectors. In view of

the importance of small hydro as a decentralizedsource of power, it should be included in 100 percent depreciation benefits", says Raghuraman,rather hopefully. Other financial sops that theindustry pundits feel should be provided are,increase in rate of depreciation for solar andwind plants from the present level of 80 to 100per cent and exemption of the renewable sectorfrom Minimum Alternate Tax. The industry isalso asking for a reduction on import duties onsolar panels.

Institutional issuesOn the institutional front, there is a strong feltneed for a separate organization to coordinatecentralized evacuation of renewable energypower. "The central government should examinethe possibility of forming a renewable corpora-tion to purchase power produced from renew-able energy sources at a remunerative price," saysBakshi. Some stakeholders also feel the need fora renewable energy fund with a large corpus of

say Rs 5 billion. Explaining the concept,Hemant Lamba says that the corpus would buythe green kWhs by providing higher realisationsto green power producers. "For solar PV, forexample, this fund should buy services for elec-trifying villages and communities which are notconnected to the grid", he adds. He also hopesthat the year would witness the formation of acompetent research organisation - of the caliberof the Indian Space Research Organisation orthe Defence Research and DevelopmentOrganisation - to lead the R&D efforts in RE.He also envisions the setting up of the IndianRenewable Energy Commission, on the lines ofthe Bhaba Atomic Research Commissions, overthe next year.

Another demand, voiced both by energy ana-lysts and equipment manufacturers is the intro-duction of a "green cess". On this front, it isencouraging to find supporting policy pro-nouncements, such as the one by theGovernment of Maharashtra. In a recent move,

A renewables fund could supply more solar PV for electrifying villages and communities which arenot connected to the grid

2004 could be a good year for renewables in India.

the state government has proposed to impose a5 paise cess on industrial and commercialpower generated through fossil fuel-basedresources. "The state expects to generate aboutRs 800 million through this route, which willbe used for funding RE projects", pointed outRaghuraman. Some industry experts feel thatsuch a move should be initiated along with a"tradable green certificate" program within thecountry. "Green certificates will enable thosewho carry on their activity by achieving emis-sion/pollution levels below the permitted ceil-ings to sell the surplus entitlement to otherswho are not able to meet the pollution mitiga-tion obligation", comments an energy analyst.This is a market mechanism intended to makegreen manufacturing a profitable proposition,and such a move will promote RE commercial-isation in the country.

BudgetAs regards the budget (to be out by the end ofFebruary) industry experts are hoping for a bagfull of fiscal goodies. In a surprise develop-ment, the New Year saw the finance ministerextending sops such as a reduction of customsduty across the boards (bringing down the ceil-ing from 25 per cent to 20 per cent), alongwith the removal of special additional duty of4 per cent. This will certainly make projectswith sizeable import components more com-petitive. Much more in terms of financial andfiscal incentive is not expected from the budg-et. However, besides a marginal hike in thebudgetary support to the sector, some fundsmay also be allocated especially for R&D inthe sector this year as well.

Year of uncertaintiesThe election is one factor that could certainlyinfluence government policy this year. With

one eye on the soon-to-be-announced elec-tions, the ruling National Democratic Alliancegovernment is likely to concentrate on morepopulist policies. In the process, critical issuessuch as renewables, environment, and nationalpolicy may take a back seat, at least for thetime being. "2004 being an election year, I ama bit nervous about the government policy onsubsidies" says Hande. He adds, that such amove may hinder market development for RE.Other experts share the same sentiment andfeel that in case incentives and policies areincreased without a rationale, the RE sectorwill be caught in a bind where more incentiveswould potentially attract more investment andscale up the capacity, but would not lead to acompetitive situation where RE technologiescould match fossil fuels. Besides, there is

always a risk that if the government changes,the current sentiments, outlook and policiesmay be reversed, thus pushing some criticalissues in the backburner.

Realistic scenarioThere could be surprises and disappointments,but largely most RE industry people vouch forstability. "The current policy seems to be stablein the short run, which means that in the com-ing year, the sector will grow at a natural pace.Operation of the Electricity Act should have apositive impact on the growth of the sector,however, the impact can only be marginal,without encouragement from state govern-ments," says Raghuraman. One good thing isthat the country is targeting an extremelyambitious capacity addition target of adding100,000 MW in the next ten years. The initia-tive, which was kicked-off by the PrimeMinister at the Chief Minister's Conference onpower sector reforms on March 3, 2001, alsoaims at increasing the share of renewables to10 per cent of the additional planned capacityby 2012. This lofty figure is achievable only ifall the initiatives and efforts of various stake-holder groups are in tandem, and the govern-ment takes some bold decisions to set thingsright in the RE area. "If this figure has to beachieved, it would need a massive additionfrom all sources, be it thermal, hydro, renew-able or even nuclear" comments an industryexpert. "In India, renewable energy technolo-gies have a strong industrial base and success-ful commercialisation of these technologies islikely to continue over a period of time" addsBakshi on a positive note.

All in all, even if things remain stable, 2004could be another good year for RE. But if thegovernment provides supportive policy andincentives with a view to catapult RE, there is apotential to end the year on a glorious note.

24 reFOCUS January/February 2004 www.re-focus.net

Developing Countries

Is the absence of a National RE Policy proving to be the vital missing link in India?

In India, renewable energy technologies have a strong industrial base and successful commercialisation of these technologies is likely to continue over a period of time