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General elections to slow things down but no retreat for RE


21 January 2019 | BRIDGE TO INDIA

General elections to slow things down but no retreat for RE

India’s general elections are around the corner. Scheduled date is May and final detailed time-table should be announced soon around early March. There is emerging consensus that no single party is likely to return with majority in the parliament. The increasing possibility seems one of a highly fractured verdict and a weak coalition government. This is giving rise to fears if RE could lose policy thrust in India. The other fear is that a weak government may more generally herald a period of economic uncertainty with focus on populist vote winning policies rather than on fundamental sectoral reform.

  • We expect no dilution in policy support for RE irrespective of who forms the government;
  • There is little correlation between governments run by different ruling political parties and RE development;
  • Major policy action would be off limits for a few months putting initiatives like National Storage Mission and SRISTI at risk;

We have two broad takeaways from the pressures of electoral cycle and emerging political environment. First, the policy purdah would be imposed as soon as the elections are announced. The government would still be able to make minor policy tweaks and issue project tenders in the run up to elections, but major policy action would be off limits. That puts initiatives like National Storage Mission and SRISTI at risk of considerable delays. Populist giveaways and gimmicks are expected to attract voters in the next few months. Most of these are likely to be aimed at the farming sector and low-income section of the population. There may be some funding for the KUSUM solar pump scheme but any meaningful progress is unrealistic.

Second, we believe that the sector enjoys broad cross-political support and there is unlikely to be a retreat irrespective of who forms the government. Support for the sector is seen as being development-oriented. It is also seen as a way to earn international plaudits as India’s efforts to form International Solar Alliance (ISA) point to. A state level analysis confirms that there is little correlation between governments run by different ruling political parties and RE development. Examples – Karnataka and Andhra Pradesh, two leading RE states have been ruled by Congress and TDP respectively, whereas Maharashtra and Uttar Pradesh lag significantly despite strong BJP governments. ­

Figure: Commissioned and pipeline RE capacity vis-à-vis March 2022 target

Source: BRIDGE TO INDIA research
Notes:

  1. This chart includes data for only utility scale solar and wind projects.
  2. Rajasthan, Madhya Pradesh and Chhattisgarh have recently elected Congress led state governments.
  3. For pan India tenders with provision for inter-state transmission connectivity, capacity is assigned to states based on offtake rather than project location. This information is not available for about 5,400 MW of pipeline projects.

Encouragingly, there are some studies showing that coalition governments do not have an adverse impact on economic growth and performance. But a note of caution is still needed – day-to-day policy formulation and urgency behind the sector would be likely casualties in the event of a coalition government.

To read more about our assessment of the RE sector in 2019, please read our latest report – India RE Outlook 2019.


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