New Delhi: The government has allocated Rs 35,000 crore for “priority capital investments” towards India’s energy transition to meet its net-zero objectives, finance minister Nirmala Sitharaman announced Wednesday, calling “green growth” one of the country’s top priorities for the year.
Sitharaman announced a slew of measures to aid this “green growth” agenda, including support for scrapping and replacing old vehicles, ramping up battery storage systems, setting up compressed biogas plants, and promoting coastal shipping through public-private partnerships (PPP) “as the energy efficient and lower cost mode of transport”.
“These green growth efforts help in reducing carbon intensity of the economy and provide for large-scale green job opportunities,” Sitharaman said in her speech.
The push for schemes to speed up India’s sustainable development comes at a time when it is set to achieve net-zero carbon emissions by 2070. India is currently the world’s third-largest emitter and will rely heavily on ramping up renewable energy and green hydrogen fuel to decarbonise in line with its objectives.
The Ministry of Environment, Forest and Climate Change (MoEFCC) got a budgetary allocation of Rs 3,079.40 crore this year, a slight increase from last year’s Rs 3,030 crore.
Sitharaman said the National Green Hydrogen Mission announced last year would be awarded an outlay of Rs 19,700 crore, and that the mission “will facilitate transition of the economy to low carbon intensity, reduce dependence on fossil fuel imports, and make the country assume technology and market leadership in this sunrise sector.”
She added the government would integrate Ladakh’s grid with an inter-state transmission system to evacuate 13 gigawatts (GW) of renewable energy from the Union territory, at a cost of Rs 20,700 crore — Rs 8,300 crore of which will be sponsored by the central government.
The battery energy storage system for the renewable energy sector will also get support through Viability Gap Funding (VGF) — designed to provide capital support to PPP projects — to build up a capacity of 4,000 MWH.
To facilitate the production of electric vehicles, “customs duty exemption is being extended to import of capital goods and machinery required for manufacture of lithium-ion cells for batteries used in electric vehicles,” Sitharaman said.
Experts have pointed out that the Rs 35,000 crore allocated to India’s energy transition is split between the Ministry of Petroleum and Natural Gas and oil marketing companies (OMC), sending mixed signals about which path the transition will take.
“Although investment in a strategic petroleum reserve enhances energy security, it is unclear what the huge allocation for oil marketing companies means. For example, if a majority of this allocation would go towards gas exploration, then it signals a bet on ‘gas’ as the bridge fuel to India’s energy transition,” said Aman Srivastava, Fellow at the Centre for Policy Research.
According to Balasubramanian Viswanathan, Policy Advisor at the International Institute for Sustainable Development, “While controlling energy prices and ensuring energy security is critical, India must ensure that financial support is directed towards low carbon technologies.”
Also read: Budget 2023: Rs 2.40 lakh crore for Railways to boost expansion — highest outlay since 2013
Ecosystem conservation, ‘natural’ farming, clean fuel
In line with the ‘Lifestyle for the Environment’ (LiFE) mission announced by Prime Minister Narendra Modi in 2021 — which aims to promote sustainable lifestyles — the government will implement a “green credit” programme to inspire behavioural change.
“This will incentivise environmentally sustainable and responsive actions by companies, individuals and local bodies, and help mobilise additional resources for such activities,” Sitharaman said.
She also announced the “Mangrove Initiative for Shoreline Habitats and Tangible Incomes” (MISHTI) scheme, which will “will be taken up for mangrove plantation along the coastline and on salt pan lands, wherever feasible, through convergence between MGNREGS, CAMPA Fund and other sources.”
The budget promoted wetland and biodiversity conservation through an ‘Amrit Dharohar’ scheme, with the aim to encourage “optimal use of wetlands, and enhance biodiversity, carbon stock, eco-tourism opportunities and income generation for local communities.”
To “promote a circular economy”, the government will set up 500 “waste to wealth” plants at a cost of Rs 10,000 crore, 200 of which will be compressed biogas plants. Biogas is produced through the anaerobic digestion of biomass. It is compressed after it is purified by removing carbon dioxide and hydrogen sulphide and since compressed biogas has a high calorific value, it can be used as an alternative fuel for automobiles.
A majority of these “waste to wealth” plants — 300 — are envisioned to be in rural areas, said Sitharaman.
She added the government will incentivise the use of “alternative fertilisers” to balance the use of chemical ones, as well as promote “natural farming”. India’s agriculture sector is the second largest emitter, accounting for 16 per cent of India’s emissions, after electricity.
‘Should have introduced policies to solve problems pertaining to EV industry’
In last year’s budget, domestic manufacturers of solar modules — components that make up solar panels — were given a boost with a production linked incentive (PLI) of Rs 19,500 crore. Sops such as “battery swapping” had also been announced for the electronic vehicle (EV) sector.
She had also announced the issuance of ‘green bonds’ to help finance green projects and make them bankable.
Earlier this month, the RBI said it would auction Rs 160 billion ($1.93 billion) worth of sovereign green bonds in two tranches to raise funds for renewable energy projects and others that would “help in reducing the carbon intensity of the economy”.
The first auction of 5-to-10-year green bonds worth Rs 40 billion happened on 25 January. A second auction, for bonds worth the same amount, is due to happen on 9 February.
Some of last year’s announcements — like the creation of a single application clearance process — haven’t yet materialised. Among these was Sitharaman’s announcement that the PARIVESH portal — the existing website to track forest, coastal, environment, and wildlife clearances — would be expanded to include a single form for all four applications.
More could have been done this year to smoothen India’s energy transition, said experts .
“The VGF support for the 4 GWh battery energy storage system announced in the Union Budget and greater thrust on pumped hydro (pumped storage hydropower) are critical to help India move towards meeting its Energy Storage Obligation targets,” said Rishabh Jain, Senior Programme Lead at think tank Council on Energy, Environment and Water (CEEW). “The VGF support should, however, be leveraged to increase our understanding of the technology and application and should not be considered as a continuous tool for support.”
“CEEW Analysis suggests that the key equipment for battery cell manufacturing is imported and their share is between 65-75 per cent of the overall infrastructure costs. Going forward, the government must aim to acquire critical minerals from overseas and build the capability to process them,” added Jain.
Saurav Goyal, co-founder of recycling firm Metastable Materials, feels that along with focusing on green energy growth, the government should have also introduced some policies to solve a major problem pertaining to the EV industry — recycling of the batteries. “This will further help the government to eliminate any future hurdle in achieving the net zero target,” said Goyal.
(Edited by Anumeha Saxena)
Also Read: Budget 2023: ‘Infrastructure, digital, green’ — buzzwords that dominated Sitharaman’s speech