Fiscal Incentives and Solar Power Generation in India: With Special Reference to Rooftop Photovoltaic and Small Solar Power Generation Programme (Rpssgp) Scheme

Abstract

In a fossil fuel dominated world, with a vision of net-zero emissions by 2070, India has adopted a “remove, target, and shift” approach by moving away from its heavy reliance on fossil fuel, to foster clean energy alternatives. By systematically reducing fossil fuel subsidies, the country has unlocked opportunities for investment in solar energy and upgradation of energy grid providing tax incentives and fiscal assistance. In this reformative approach Government of India has taken several initiatives for reducing the uses of fossil fuel and encouraging dependence on green energy including solar. The Solar Rooftop Scheme is an innovative program designed to encourage the extensive use of solar energy by utilizing rooftop spaces for electricity generation.The Government of India has offered direct assistance in form of generation based incentives (GBI) and indirect assistance by providing 80% depreciation allowance clubbed with 20% accelerated depreciation allowance resulting to 100% tax benefits for capital asset additions for generating solar power. In the union budget 2017 the Government has slashed down the rate of depreciation to 40% resulting only 60% of asset addition as tax benefit for initial year on the rational that investors or project developers have only focused on catering tax benefits in earlier years but later time they are not focusing on increasing efficiency. This study aims to throw light on India’s solar power potential and to examine the fiscal initiatives to promote solar power generation. The study further attempts to observe whether the accelerated depreciation scheme and its subsequent changes have impacted solar power generation in India in presence of assistance via generation based incentives (GBI. Specifically, it focuses on analyzing solar power generation data for rooftop photovoltaic systems under the Rooftop Photovoltaic and Small Solar Power Generation Programme (RPSSGP) in the periods before and after the reforms in tax incentives through accelerated depreciation scheme.