India has become a juggernaut in the renewable energy space. In 2019, India was ranked as the fourth most attractive renewable energy market in the world. Currently, India has the 5th largest commissioned renewable energy projects in terms of capacity. If you are looking to invest in the renewable energy sector in India, there are a few things that one must look out for. This includes multiple factors including geography, policy etc. In all this, Positive Energy has a unique solution to bring potential investments closer to interested parties and it would be good to have a clear overview of the renewable energy situation in India today and tomorrow.
India, in its fight to maintain growth is the sector has set an ambitious target to have 175 GW of renewable power commissioned by 2022. This includes:
- 100 GW from Solar power
- 60 GW from Wind power
- 10 GW from Biomass power
- 5 GW from Small Hydro power
As of February 2020, the total installed renewable energy capacity in the country is 86.75 GW. of which solar and wind comprises 34.40 GW and 37.66 GW respectively. Biomass and small hydro power constitute 9.80 GW and 4.6 GW, respectively. Off-grid renewable power capacity has also increased. Similarly, generation capacities for Waste to Energy, Biomass Gasifiers stood at 139.80 MW and 9,806.31 MW, respectively.
With a potential capacity of 363 gigawatts (GW) and with policies focused on the renewable energy sector, Northern India is expected to become the hub for renewable energy in India.
When it comes to Foreign Direct Investment, investors go through the automatic route (not requiring prior government approval) when investing in renewable energy.
As a further guide to investing in India, the taxation system would be an important factor in the process.
India follows a unique tax system that is set up to cover the ways of doing business in the country. This would include the system of Minimum Alternative Tax (MAT). This is a tax system introduced in India by the Finance Act of 1987 to facilitate the taxation of zero tax companies i.e. companies showing negligible income to avoid tax. Under MAT such companies are liable to pay the government MAT by deeming their book profit as taxable income.
In the budget announced in April 2019 which will stay in effect through the lockdown and beyond has offered a route for investors more of an incentive to invest in renewable energy through its changes in tax.
The structure of corporate tax is as follows:
|Type of Company||New Corporation Tax Rate||Additional Benefit/Requirements
|Corporations not seeking any incentives/exemptions||22% (earlier 30%) + applicable cess and surcharge. Effective corporate tax rate of 25.17%||No MAT (minimum alternative tax) payable by these companies|
|Corporations seeking incentives/exemptions||Unchanged at 30%||MAT rate reduced to 15% from earlier level of 18.5%|
The current setup for withholding tax dealing with investments in India have been broken down country-wise as shown in the link below.
For most countries the withholding tax comes up to 10% as per government regulations.
State wise Policy
Each state operates differently when it comes to renewable energy. This is reflected by the fact that one would find more projects commissioned in some states over others due to differences in policy or geography. The installed capacity by state and mode of renewable energy is shown in the link below.
For most investments in utility scale projects, it is important to ensure exploring projects connected to state DISCOMs who practice on time payments. The following table has divided states into ratings of timely payment with Tier 1 being the best and the numbers going down having more issues with delayed payment. It is important to line up the type of investment with the state for timely payments as well as the performance of the mode of renewable energy in that state.
|Tier 1||Jharkhand, Assam, Tripura|
|Tier 2||Gujarat, Maharashtra, Himachal Pradesh, Punjab, Bihar, Sikkim, Mizoram|
|Tier 3||Haryana, Rajasthan, Delhi, Uttarakhand, Uttar Pradesh, Madhya Pradesh, Chhattisgarh, West Bengal, Odisha, Arunachal Pradesh, Nagaland, Manipur, Meghalaya, Telangana, Andhra Pradesh, Goa, Karnataka, Kerala, Tamil Nadu, Puducherry|
|Tier 4||Jammu and Kashmir|
In summary, the Indian government has set the renewable energy sector as a priority in the years to come. With tax rates being eased, as of the latest budget, India proves to be one of the most promising locations for investment in renewables.
To bring investors from all over the world closer to projects in India, Positive Energy breaks physical borders. Positive Energy is a digital platform for renewable energy investments offers investors access to projects in Asia. We offer investors vetted dealflow and offer the projects great outreach. Our platform has matchmaking, standardised due diligence, virtual dataroom and integrated financial modelling.
Positive Energy currently has over 720 mln USD of projects listed, predominantly in South/South-east Asia. These are in the form of multiple investment opportunities providing double digit IRR. We host solar (C&I, utility, community), hydro, biomass, wind and storage.
To find out more about Positive Energy, please visit www.positiveenergylimited.com