India Mulling Introduction Of Tax Incentives For Residential Solar

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Indian homeowners who install solar energy systems may soon have tax breaks made available to them to help lower their burden, based on recent reports.

The country’s Ministry of New and Renewable Energy (MNRE) recently put forward a proposal for the introduction of tax incentives for residential rooftop solar installations. The Ministry of Finance is expected to reach a decision on the proposal sometime before the end of the summer.

Image Credit: India flag via ShutterstockImage Credit: India flag via Shutterstock

Given that there are currently no tax breaks available to residential solar energy system owners, the move by the Ministry is one that could have a notable effect — potentially spurring significant growth in distributed solar generation capacity, as is the MNRE’s aim.

As Bridge To India notes, this proposed income tax incentive is not output-related and is based entirely on the investment made — potentially leading to poorly constructed systems.

Such tax incentives tend to incentivise short term decisions rather than the longer term investment approach befitting a long-lasting renewable energy installation. The Indian wind sector has grappled with this challenge. The second is that such tax benefits depend on the investor’s ability to absorb tax benefits and are not available to all investors thereby distorting the market. Why not decouple the tax benefit from the investment in the same way that, say a carbon credit or a renewable energy certificate can be traded independently of the power output? That would attract professional, financial investors who want to develop solar projects in special purpose vehicles which cannot utilise income tax or accelerated depreciation incentives. They are expected to be better at developing, financing and operating solar power plants because of their ability to bundle projects and their greater focus on quality and experience. This would drive down the cost of solar and create a level playing field.

Good points. Honestly, though, any incentives would be a big improvement over the current state of affairs.

In related news, India’s installed solar capacity just recently crossed the 2.5 GW milestone (during the month of May). Growth hasn’t been common to all of the country’s regions, though. Nearly all of the capacity installed to date (70%) can be found in the deserts of the western states of Gujarat and Rajasthan. And nearly all of it is via large utility-scale projects — a situation that the (potential) new residential incentives can address.

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James Ayre

James Ayre's background is predominantly in geopolitics and history, but he has an obsessive interest in pretty much everything. After an early life spent in the Imperial Free City of Dortmund, James followed the river Ruhr to Cofbuokheim, where he attended the University of Astnide. And where he also briefly considered entering the coal mining business. He currently writes for a living, on a broad variety of subjects, ranging from science, to politics, to military history, to renewable energy.

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4 thoughts on “India Mulling Introduction Of Tax Incentives For Residential Solar

  • At a recent conference, representatives of the Indian solar industry actually called on the government to abolish its solar subsidy programme. This has run out of money, but investors file an application and wait in the vain hope the tap will be turned on again, rather than starting on projects which are profitable without subsidy. A second-best incentive programme that can actually be administered by the bureaucracy India has now is better than am ideal programme that can’t.

  • This is a nice gesture that is totally not needed. If the Indian government wants to see more residential installations simply make the panels available either through expanding in country production or by opening up imports. As explained before family members just finished this past fall a four and a half year wait for their installation just because the panels were not available. And there are plenty of other middle and lower middle class families that will do installations just to have guaranteed power during the daylight hours as often times the grid is only on 2-4 hours a day.

  • With this year’s rain falling to 100 year low, this step is urgent.

    I live in an apartment on second floor. Very small balcony to install solar panels. Their size has to be smaller. I hope that solar efficiency increase pretty drastically.

    Also high capacity environment friendly batteries are also cheaper. I want to fully solarize my home, which requires battery with storage capacity of at least 10KWh.

    LED have become quiet cheap. I have got 3W LED for a US$1/- here in India. Of course, chinese made or delhi assembled.

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