Modi Pledges Funds to Reform Grid, Boost Solar to Curb Blackouts

Jul 10, 2014 5:06 am ET

(For more on India’s budget, see INEL <GO>.)

July 10 (Bloomberg) -- Prime Minister Narendra Modi’s government plans to spend 15 billion rupees ($250 million) on programs to boost solar power and reform electricity supply to farmers to end blackouts in India.

“Power is a vital input for economic growth,” Finance Minister Arun Jaitley said today in his budget speech. “The government is committed to providing 24/7 uninterrupted power supply to all homes.”

More than 300 million people in India lack access to electricity, equivalent to the total U.S. population. The previous government missed a 2012 target to provide electricity to all households.

The proposed budget, which needs to be passed by parliament by July 31, earmarked 5 billion rupees to roll out a program implemented by Modi in his home state of Gujarat, where power feeder lines to farmers were separated from those to other consumers. That enabled Gujarat to ensure uninterrupted electricity to most areas by reducing theft and limiting the volume provided below-cost to farms.

While the proposals will improve the quality and availability of power, the resources required to split off rural electricity supply “are far larger than budgeted,” said Kameswara Rao, head of energy, utilities and mining in India for PricewaterhouseCoopers LLP.

“This initial allocation should be used to attract domestic and multilateral funds,” to supplement the program, he said.

Sun Power

The budget set aside 10 billion rupees on projects to boost the use of sun power. Five billion rupees would be spent on building so-called ultra-modern solar power plants in Rajasthan, Tamil Nadu and Jammu and Kashmir states. Another 4 billion rupees would go toward installing 100,000 photovoltaic-powered farm irrigation pumps, and an additional 1 billion rupees to lay solar panels on the banks of canals.

A tax on coal producers used to fund clean-energy programs would also be doubled to 100 rupees a metric ton, according to the budget. The tax, introduced in the 2010 budget, collected about 25 billion rupees in its first year.

Jaitley also announced plans to cut or eliminate duties faced by solar manufacturers, wind-turbine makers and builders of biogas plants.

Photovoltaic panel-maker Moser Baer India Ltd. rose 4.6 percent to a two-year high of 12.5 rupees in Mumbai. Solar-cell maker Indosolar Ltd. advanced 4.4 percent.