The waiver is an attempt to help finance pollution curbing equipment and alleviate significant debt levels in the power industry. As per the proposal, a waiver of INR400 rupees/ton ($5.61) of carbon tax would be given on the production and import of coal in India.

The waiver would help project proponents of coal-fired plants to install pollution curbing equipment that would cut the emissions of sulfur dioxides.

Mohit Prasad, project manager at GlobalData, comments: “The power sector in India is mainly driven by the non-renewable energy sector with coal contributing more than 55% of the country’s installed capacity. The waiver in carbon tax is likely to have a negative impact on the growth of renewable energy. The coal-based power sector, which had witnessed cancellations of projects and competitions from renewable sources after the cost of renewables in India fell below that of coal, and gas-based power will now regain momentum.”

As per GlobalData, the annual installations of coal-fired plants have dipped from 2016 and the declining trend has continued to 2018. During the same period, however, solar PV installations have increased significantly, mainly driven by competitive auctions.