The government has not shied away from announcing its green plans to the world in the last one year. From green hydrogen policy to increased renewable energy targets at COP26 to talking about energy transition, a big change is underway.
Budget 2022 also focused on ensuring that the investments in this space see an impetus, execution is in place and hence, it has outlined a series of announcements to expedite growth in the green energy space.
First, the government announced additional allocation of Rs 19,500 crore in the Budget to solar PV module manufacturing under the PLI scheme to ensure India reaches 280MW of solar capacity by 2030. This is a sizeable expenditure and is followed by a series of announcements like basic customs duty of 25 per cent on import of solar cells and 40 per cent on import of solar modules. Low carbon development strategy is what the government has committed to.
Second, government has also spoken about how bio-mass pellets will be used in thermal power generation to ensure lower emissions. The Budget says that bio-mass pellets would make up 5-7 per cent of the fuel mix used in thermal plants, resulting in CO2 savings of 38 million metric tonnes annually. The execution of this will be watched out for as bio-fuels have been the big focus of the government.
Third, sovereign green bonds were the other highlight of Budget 2022 which ensure Indian government will join a select group of countries that have issued such bonds. So far, India has lagged in issuance of green bonds globally and this would at least ensure that domestic green bond market is developed.
Gagan Sidhu, director at Council on Energy, Environment and Water (CEEW), says, “The Budget proposal to issue sovereign green bonds has several benefits, principal among them is signalling the country’s seriousness in pursuing climate action. India will now join a select group of countries, primarily European, which have issued such bonds. We can also expect this move to catalyse the development of the domestic corporate green bond market. Green bond issuances by Indian companies in the overseas debt capital markets have considerably lagged so far. If sovereign green bonds price at lower yields versus their non-green counterparts, it will also provide an added signal for the private sector to direct their own capital towards green investments. This important move also ties in with the capital expenditure push – a key feature of this Budget – and cuts across two of the four pillars that the Finance Minister highlighted in the Budget speech: Energy Transition and Climate Action, and Financing of Investments.”
Fourth, the push to e-mobility. Considering the space constraint in the urban market, the Battery Swapping Policy and inter-operability standards would be formulated to promote the use of clean mobility in urban markets. The private sector would be encouraged to develop business models for ‘Battery’ or ‘Energy-as-a-Service’.
Fifth, an additional Basic Excise Duty of Rs 2/litre has been imposed on petrol and diesel, intended to be sold to retail consumers without blending. This would be levied with effect from October 1, 2022. This is to ensure that ethanol blending is higher, to lower the emissions.
Nandita Tripathi, Partner and Tax Sector Head-ENR, KPMG, calls it a “Green Budget” with a strong push for EVs, clean energy and transition towards circular economy. Announcement of PLI scheme for domestic capacity building and green sovereign bonds, coupled with significant capital expenditure commitment puts the country on the right path for sustainable growth and development
India has been one of the few nations to achieve the NCDs (nationally determined contributions) to fight climate change. It is getting more ambitious with these targets, but the execution and the financing capabilities will be something to watch out for.
Sonal Bhutra is Senior Research Analyst and Anchor with CNBC-TV18.
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