Union Budget 2023-24: What’s in Stock for the Energy and Sustainability Sector?

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INTRODUCTION

At the 26th session of the Conference of Parties to the United Nations Framework Convention on Climate Change (UNFCCC), India set ambitious targets to combat climate change, including: (i) achievement of 500 GW of non-fossil energy capacity by 2030; (ii) extraction of 50% of India’s energy requirements from renewable energy by 2030; (iii) reduction of total projected carbon emissions by one billion tonnes from 2022 to 2030; (iv) reduction of the carbon intensity of the economy by 45% by 2030, over 2005 levels; and (v) achievement of net zero emissions by 2070.

The announcements for the energy sector in the union budget for the fiscal year 2023 – 2024 are clear indicators of the intention to achieve these targets and to harness India’s journey towards a greener and sustainable future.

BUDGET SPEECH – KEY HIGHLIGHTS & ANALYSIS

Green energy has been considered one of the “seven guiding lights” that would steer India in a positive direction over the next 25 years. The Government of India aims to lower the nation’s economic carbon footprint and provide for large-scale green job opportunities by implementing several programmes and policies for the efficient use of energy across various sectors of the economy.

While the National Green Hydrogen Mission approved recently on 4th January 2023, with an investment outlay of INR 19,700 crores, will act as the major facilitator in transitioning to lower carbon emissions, reducing dependency on fossil fuel imports, and making the country assume technology and market leadership, the Government has proposed the following additional schemes to pace up decarbonisation:

Investment outlay for energy transition: An investment of INR 35,000 crores for priority capital investment has been proposed towards energy transition and net zero targets under the Paris Agreement.

Battery Energy Storage Systems: In order to meet the goal of developing 500 GW of renewable energy by 2030 (as mentioned above), India needs to increase its battery energy storage systems to stabilise intermittent renewable power and balance the grid. In pursuance of this, it was announced that battery energy storage systems with a capacity of 4,000 kWh will be supported through viability gap funding.

Pumped Storage Projects: Pumped storage hydropower plants function as huge batteries and are necessary for storing intermittent renewable energy sources like solar and wind. The Finance Minister has announced that a comprehensive legal framework for pumped storage projects will be rolled out soon. It is anticipated that off-stream or off-river pumped storage facilities would be exempted from the environmental impact assessment that is currently necessary for all projects under this ambit.

Interstate Renewable Energy Transmission Lines: The Centre, in December 2022, launched a plan to integrate all renewable energy sites into the national grid through high voltage transmission lines connected to the inter-state transmission system to meet the nationally determined contributions (“NDC”). To further this move, the current budget proposes an investment of INR 20,700 crores, which includes support of INR 8,300 crores from the Central Government, for the construction of an interstate transmission line for evacuation and grid integration of 13 GW of renewable energy from Ladakh. This is a very well thought out plan for harnessing the renewable energy potential of Ladakh to fulfill the NDC targets of India.

Green Credit Programme: The Finance Minister has proposed setting up of a green credit programme under the Environment (Protection) Act, 1986 to incentivise companies, individuals, and local bodies to take environmentally sustainable and responsive actions. The programme attempts to reward persons for taking cleaner actions and promote behavioural change in the economy.

PM-PRANAM Programme: The budget speech also included launch of the PM Programme for Restoration, Awareness, Nourishment and Amelioration of Mother Earth (PM-PRANAM). This programme will facilitate 1 crore farmers to adopt natural farming by promoting alternative fertilisers and balanced use of chemical fertilisers.

GOBARDhan Scheme: Galvanising Organic Bio-Resources Dhan (GOBARDhan) scheme has been launched with an investment of INR 10,000 crores for the establishment of 500 new ‘waste to wealth’ plants to promote a circular economy. This will include 200 compressed biogas plants and 300 community or cluster-based plants. The scheme aims to convert biowaste into biogas and fertilisers and support biodegradable waste recovery, reduce greenhouse gas emissions, reduce import of crude oil, give a boost to entrepreneurship and promote organic farming.

Promotion of Coastal Shipping: Coastal shipping would be promoted as an energy efficient and feasible mode of transport through public private partnership (PPP) model along with support through viability gap funding. This measure by the Government aims to unlock the potential of India’s long coastline spanning 7,500 km and extensive navigable inland waterways for environment-friendly transport. Further, the PPP model will help in advancing the collective financial, operational, and risk-taking capability of both parties. Water-based transport will also help in reducing the logistic costs for end-user industries when compared to rail and road transport.

In addition to the above-mentioned propositions, adequate funds have been allocated towards the promotion of vehicle scrappage policy to replace ambulances and old vehicles of the central and state governments. The primary objective of this allocation is to phase out unfit and polluting vehicles to achieve a lower carbon footprint in the country. Green mobility has been further encouraged through exemption of custom duty on import of capital goods and machinery required for the production of lithium-ion batteries used in electric vehicles. This measure will help in reducing manufacturing costs of batteries domestically which will result in the overall affordability of electric vehicles and subsequently accelerate their adoption in both personal and commercial segments. The Ministry of New and Renewable Energy has also received a budgetary allocation of INR 10,222 crore as a step to promote off-grid solar projects.

CONCLUSION

The budget is indicative of the steps taken by the Government to achieve its ambitious targets of reduction of carbon emissions and promotion of a green economy. Focus on specific sub-sectors in the alternative energy sector, such as hydrogen and wind, transmission of renewable energy, biogas, etc. will prove to be truly efficient tools in long-term decarbonisation.

As stated by industry experts, this seems like a no harm budget. However, in order to ensure practical implementation of these schemes and policies, a robust regulatory framework needs to be set up. Overall, the budget strikes a fair balance between economic growth and social welfare, paving a way for a prosperous and sustainable India.

Please reach out to Praveen Raju and Janhavi Joshi for queries.