This budget places high priority on clean and renewable energy and offers a number of incentives for solar and wind projects.
Industry experts say the Rs 1,000 crore allocated to the solar power sector would go a long way in enhancing the country's energy security.
Of this, Rs 500 crore has been allocated for ultra mega solar power projects in Rajasthan, Gujarat, Tamil Nadu and Ladakh in J&K, Rs 400 crore for installing 1 lakh solar power-driven water pump sets and Rs 100 crore for developing 1-MW solar parks along canal banks.
The green energy corridor project for transferring power generated from clean sources to mainstream grids will be accelerated this fiscal.
"We need to maximise solar power utilisation. The existing duty structure incentivises imports rather than domestic manufacturers of solar photovoltaic cells and modules," finance minister Arun Jaitley said in his budget speech. Several raw materials like EVA sheets, solar back sheets, flat copper wire and forged steel rings used by solar and wind energy producers were also granted duty exemptions.
The basic customs duty on solar power projects and compressed biogas plants has also been brought down to 5%.
To encourage wind power generation, the basic customs duty on forged steel rings has been cut from 10% to 5%. These rings are used to manufacture the bearings of wind-operated electricity generators. A 4% special additional duty (SAD) on parts manufacturing wind generators has also been exempted.
"The Green Energy Corridor Project will integrate channels for solar power evacuation– a formidable challenge for companies at the moment. The removal of customs and excise duties on solar equipment will encourage indigenous companies to increase domestic manufacturing and reduce reliance on imports. These are welcome moves," Ratul Puri, Chairman, Hindustan Powerprojects, said.
"Solar power generation has always been questioned on higher costs in comparison with thermal power. Several measures in the budget would bridge that gap and bring in parity," said Harish Goyal, chief marketing officer of Acme, a company providing solutions for both thermal and photovoltaic technologies.
"The budget seeks to boost the renewable energy sector. Encouraging large-scale solar power generation through fiscal incentives will help revive investor confidence and increase capacity," Tata Power said in a statement.
India's National Action Plan on Climate Change recommends 10% power production from solar, wind, hydropower and other renewable sources by 2015, and 15% by 2020.
Jaitley also increased the quantum of clean energy cess currently levied on coal and lignite from Rs50 per tonne to Rs100 per tonne.
The budget allocated Rs 100 crore for Ultra Modern Super Critical Coal-Based Thermal Power Technology. It also extended the 10-year tax holiday to those projects which start operations by March 31, 2017.