Clean Power Coal Tax To Fund India's 750 MW Solar Power Capacity Addition Plan In 2013

Published on May 20th, 2013 | by Mridul Chadha


Coal Tax To Fund India’s 750 MW Solar Power Capacity Addition Plan In 2013

May 20th, 2013 by  

The Indian government is set to repose millions of dollars in financial support for solar power project developers from the coal tax corpus it has accumulated over the last few years. Project developers looking to set up projects under the second phase of the Jawaharlal Nehru National Solar Mission will receive financial assistance over capital cost expenditure.

According to the guidelines recently released by the government, the project developers will receive financial assistance of up to Rs 2.5 crore per MW ($0.45 million per MW) or about 30% of the total capital investment required for a solar photovoltaic project.

Coal Tax To Fund India's 750 MW Solar Power Capacity Addition Plan In 2013

Reliance Industries’ 5 MW solar PV project at Khimsar, Rajasthan
Image Credit: Reliance Industries Limited, Rajasthan Renewable Energy Corporation Limited

The 750 MW solar PV capacity will be allocated under the Viability Gap Funding scheme, wherein the government shall support the project developers to a certain extent to set up the projects.

This capital cost assistance will come from the Clean Energy Fund formed from the one dollar per tonne tax on coal used in the country. India’s annual coal consumption is over 600 million tonnes which translates into over $540 million in annual revenue for the Clean Energy Fund. A major portion of this revenue is expected to be utilized for building a massive transmission network suitable for carrying the power generated by renewable energy projects.

The government also aims to tackle the issue of imported solar PV equipment during the second phase of the national solar mission.

During the first phase, project developers were allowed to use imported solar PV equipment only if they chose to use thin-film solar PV technology. As a result, a large number of project developers chose the thin-film technology which also made them eligible for low-cost debt from institutions like the US Export-Import Bank, the International Finance Corporation, and the Asian Development Bank.

The Indian government had planned to ban imports of thin-film solar PV equipment as well during the second phase but is facing confrontation with the US which supplied a bulk of the equipment during the first phase. To tackle this issue, the government has now decided to allow import of thin-film solar PV technology but with restrictions. Only a part of the 750 MW capacity planned for auction this year will be based on imported solar power equipment.

The Indian government plans to add about 3,600 MW through federal policies by March 2017. About 6,000 MW is expected to be added through state policies. A significant part of the capacity to be added in the states will be registered under the federal Renewable Energy Certificate scheme.

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About the Author

currently works as Head-News & Data at Climate Connect Limited, a market research and analytics firm in the renewable energy and carbon markets domain. He earned his Master’s in Technology degree from The Energy & Resources Institute in Renewable Energy Engineering and Management. He also has a bachelor’s degree in Environmental Engineering. Mridul has a keen interest in renewable energy sector in India and emerging carbon markets like China and Australia.

  • Mohan Raj

    Good move. Also levy a tax on petrol & diesel and build EV charging stations. Electric & Plugin vehicles are picking up in USA, soon India will also join this band wagon.

  • Chandresh

    No Point Providing one time financial assistance as who will monitor that plant perform for 25 years or is dumped by installers within 4-5 years beating the entire purpose .

    • MNRE has already started third-party performance audit of Phase I projects. If any project under this first batch of Phase II is not operational for one year, that project will be dismantled and its equipment will be sold off.

    • Mohan Raj

      Don’t worry friend, they keep generating for 25 years free of cost. So every day installer get free electricity and so they won’t dump. Especially with frequent power cuts, they will feel happy to get the solar electricity.

  • Pingback: Investors Plan To Sue Czech Government Over Solar Power Revenue Tax | CleanTechnica()

  • Marshall Harris

    So China proposed a carbon tax and India already has a coal tax. So tell me, what was our excuse again?

    • Bob_Wallace

      Not an excuse, a reason.


  • jburt56

    India does not have a Koch problem!!!

    • Ross

      Hopefully we can cross India off the list of places for irresponsible industries to export carbon intensive activities to.

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