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India seeks to boost manufacturing of clean energy products

Government has announced a production linked incentive scheme

Question: My friends in the Gulf have decided to set up manufacturing units in India for producing wind power equipment. Is this an attractive proposition and are there prospects for exporting these products from India?

ANSWER: The Indian government is very keen in playing a critical role in the supply chain of clean energy products. A collaborative partnership has been constituted by India with Japan, Australia and the United States to diversify the supply chain for solar and wind power equipment. This partnership for Resilient and Inclusive Supply-chain Enhancement (RISE) was launched earlier this month. This partnership is an initiative of the World Bank and G7 countries. The Indian government has announced a production linked incentive scheme for those who set up manufacturing units of solar and wind power equipment. Therefore, investment in these ventures will not only be profitable but will open substantial prospects for export to Japan, Australia and the United States. Apart from the PLI scheme, tax incentives are also available which would provide tax free status to the manufacturing units under the income-tax law in India.

Question: Is the sale of electric vehicles gaining traction in India? I believe state governments are going all out to promote and encourage use of electric vehicles with a view to bring down automobile pollution.

ANSWER: During the first six months of the current financial year 2023-24, registration of electric vehicles increased by 51 per cent to 740,000 units. Out of these, four wheelers accounted for 42,323 units whereas during the corresponding period of 2022-23, registration of four wheelers was just 16,095 units. The maximum increase is in the registration of electric two-wheelers. From April to September this year, 340,000 two-wheelers were registered in India. The best-performing state has been Gujarat, which recorded two-wheeler registrations of around 119,500 units. It is expected that the sale of electric vehicles will increase dramatically in the next few months as more and more facilities for charging the units are set up by government agencies and some of the problems pertaining to batteries used by electric vehicles are sorted out.

Question: My brother runs a business in India and had taken a term loan from a non-banking finance company. For certain reasons he has not been able to meet with the schedule of repayment. The finance company has warned him that he would be treated as a wilful defaulter unless he repays the outstanding amount immediately. I want to know whether the finance company can classify my brother as a wilful defaulter and, if so, what would be the consequences?

ANSWER: According to the regulations of the Reserve Bank of India, a bank or a non-banking finance company may classify a borrower as a wilful defaulter where the outstanding amount of loan exceeds Rs2.5 million and the amount has remained unpaid for six months. Under the guidelines laid down by the Reserve Bank, a person can be treated as a wilful defaulter if he has deliberately not paid the amount of loan though he has the capacity to do so, for which the value of his personal assets would be considered. Further, a person would be liable to be treated as a wilful defaulter if he has siphoned the loan amount for purposes other than the purpose for which the loan was sanctioned. However, before the borrower can be treated as a wilful defaulter, he should be given an opportunity of being heard before a review committee set up by the bank or non-banking finance company. Generally, a promoter or managing director can be treated as a wilful defaulter and non-executive directors cannot be treated as such. Once a person is treated as a wilful defaulter, he cannot be a director in any other company or take up a key managerial position.

H.P. Ranina is a practising lawyer, specialising in tax and exchange management laws of India.