By Martin Shwenk Leade
Copyright indiatimes
ReutersIndia power sector (Image for representation)
The cut in goods and services tax (GST) on the renewable energy value chain from 12% to 5% is expected to lower annual power procurement costs for distribution companies by nearly Rs 3,000 crore. The move aims to address the growing financial strain on utilities while accelerating the adoption of green energy across the country.Although consumers may not see an immediate reduction in electricity tariffs, the measure is expected to reduce the gap between what discoms spend on power and what they recover from customers, The Times of India reported on September 18.Rating agency ICRA estimates this gap at 45 paise per unit, a shortfall that has worsened the sector’s debt burden, the report (by Sanjay Dutta) said.As of March 2024, discoms carried gross debt of Rs 7.4 lakh crore, up from Rs 6.6 lakh crore the year before.Tariffs remain sticky despite these challenges. For 2025–26, tariff revisions cleared by 23 states so far show a median hike of 1.9%, only marginally lower than the 2.1% increase approved for 2024–25.Live EventsLimited upward adjustments have left discoms struggling with losses from line inefficiencies and billing gaps. In that context, lower power procurement costs from renewable sources offer some fiscal breathing room.The broader impact of the GST cut is likely to be felt in the economics of renewable projects. According to the renewable energy ministry, the cost of a grid-scale solar project — currently about Rs 4 crore per megawatt — will fall by nearly Rs 25 lakh.At the size of a 500 MW solar park, that translates into savings of over Rs 100 crore, potentially improving returns and making levelised tariffs for clean power more competitive.Households could also see solar energy becoming more affordable. A 3-kilowatt rooftop solar system is projected to be cheaper by Rs 9,000–10,500, a reduction that may encourage more families, especially those with modest incomes, to invest in rooftop installations.Farmers, too, are expected to benefit through lower prices for solar pumps under the PM-KUSUM scheme, while off-grid projects in remote and rural areas will become more cost-effective, ToI’s report highlighted.The most far-reaching consequence will likely be in manufacturing. Component costs for renewable projects are estimated to fall by 3–4% following the GST cut. This could improve the competitiveness of Indian manufacturers, spurring expansion and creating new jobs in a sector viewed as central to India’s clean energy transition.Add as a Reliable and Trusted News Source Add Now!
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