Solar Energy – A Tax Saving Tool

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Vikalp Mundra, Joint Managing Director, Ujaas Energy

Solar power spectrum can emerge as the real game changer. Willingness and a positive approach from the governing body is an essential for all renewable power resources to flourish effectively.

 The potential of solar energy has been a The potential of solar energy has been a hot topic for discussion in India, a country which is racing to meet the power requirements of an exploding population. Just like after a dark night the sunlight starts radiating light at dawn, the entire solar spectrum in India is on a constant evolution.

Trailing Growth
Considering the present scenario, demand for renewable power, particularly from the solar sector, will increase. Besides, the utilization of solar energy is prospective alternate to conventional energy for both the rural and urban regions. In remote rural regions, solar is best suited for distributed power supply. Additionally, with the solar energy nearly approaching grid parity, it provides a suitable option for meeting the power requirements in the urban areas.

The sector is also on a constant evolutionary growth with the fast paced technical progress. The latest innovation is the installation of rooftop solar panels. The concept of rooftop solar panels is increasingly gaining momentum in the Indian market, particularly in the tier-I and urban metro regions; the technology has to yet establish its firm presence in the tier-II and tier-III areas. Reviewing the growth pace witnessed in this segment, the industry is optimistic that the technology will soon succeed in convincing the masses and in establishing its presence across distinct regions in India.

Installation of solar plants under Renewable Energy Certificate (REC) mechanism is other latest development being witnessed in India’s solar spectrum. If solar REC sale picks up pace in the coming three months, the market will move very fast.

Benefits of Solar Plants
Solar power will become one of the biggest contributors to India’s huge appetite for power, as the country and its economy grow steadily to become a developed nation. The benefits of using solar plants can be summarized as:

 Scalable: No other form of power generation technology is as scalable as solar power. While the other forms of power generation technologies often have a fixed capacity potential where variation is not possible, solar power offers this advantage; the smallest plant can be as small as 0.5 KW and largest plant can be 500 MW(+).

Modular: Solar power plants can be designed in such a way that they can be upscaled of downscaled depending on the energy needs.

Replacement: Being modular, the cost of faulty parts is very low as compared to other power generating plants.

Ease in shifting: A solar power plant can be easily shifted from one place to another and thus ensures ease in the installation process. When compared to other forms of renewable segments this is an added benefit, as shifting a wind or hydel power plant is almost impossible.

Boon for Investors
There are two types of investors in solar power plants: corporate who have a big tax liability, and high net income (HNI) individual or groups as an energy asset class. Owning a solar power plant is beneficial for corporates having a high tax liability as, it allows 100 percent depreciation, which is a very good option for tax planning. Besides, solar power plants prevail as an boon for HNI, as income from solar plants are eligible for tax free income under section 80(I)A. This ensures a positive return which is almost fixed in nature. Till date, Ujaas Energy Ltd has commissioned more than 60 MW in four solar parks, all based in state of Madhya Pradesh. Almost 30 companies have already gained benefits and we are gaining more positive inflow with the growing reach of awareness about the utilization of this model. The model also persists as an economic beneficiary, wherein 65-70 percent of funding is easily available for solar projects from banks and financial institutions.

Cost Effectiveness & Land Procurement
The concept of installing solar panels is often misunderstood and a myth of high cost involvement is often associated with it. However, with the solar power almost achieving grid parity, a little push from the government for a couple of years can make this sector effectively self-sustainable. Ujaas is constantly involved in spreading awareness at all possible forms. The issue of land procurement is often a topic of grave importance, not just for the solar sector but for any business activity. Ujaas takes this in a very holistic way and compensates land owners by giving a fair price.

 Need for Effective Policy Frameworks
Though India has implemented a comprehensive policy framework for solar energy, a need to execute these policies and plans into practice for reaping the benefits still remains unmet. Power being a state subject; it is now the responsibility of the states to take the initiative. While some states are aggressively in line with central policy, few are catching up and some are yet to start. Power is a crucial element and is an essential aspect in meeting the infra-construction demands of any economic activity. Hence, an active approach from the government becomes of core importance for the growth of this sector.

2013 saw a sluggish growth for the solar sector, a major reason being the lack of effective push from the government, particularly in the implementation of renewable purchase obligation (RPO). Willingness and positive approach from the governing body is an essential for all renewable power resources to flourish effectively. This is applicable not just for developing countries like India but for any country in this globe. For instance, solar power segment in Germany enjoys a prospective presence, due to the government’s aggressive participation and policies like the feed in tariffs.

The other need of the hour is implementation of net-metering policy and regulation policies. Being a tropical country, India is blessed with good sunlight in most part of its topography; hence a need prevails to effectively tap in the potentials of this renewable resource. However, the need of the hour is net-metering policy and regulation policies. Reviewing the prevalent potentials, we anticipate solar power segment to be the real game changer.

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