How Budget 2023 could accelerate India’s transition to a greener economy

A strong focus on green energy is expected in Budget 2023. (Photo via Wikimedia Commons)

At the COP26 in Glasgow, Prime Minister Narendra Modi announced certain targets for India. These included turning net-zero by 2070, and increasing the share of renewable energy to 50 percent by 2030. To this end, in 2022-23, the Ministry of Environment, Forests and Climate Change was allocated Rs 3,030 crore.

Other key highlight with regards to the environment included:

▪ The issuing of Sovereign Green Bonds (SRGB) for mobilising resources for green infrastructure. The proceeds would be deployed in public sector projects which help in reducing the carbon intensity of the economy.

▪ The formulation of battery swapping policy to promote the electric vehicles sector. To achieve the goal of 280 GW of installed solar power by 2030, an additional allocation of Rs 19,500 crore was made for a Production Linked Incentive (PLI) scheme for manufacturing of high-efficiency solar modules.

▪ 5-7 percent biomass pellets to be co-fired in thermal power plants to reduce carbon emissions.

Also read: Budget 2022 | To boost economy, India needs a green budget

At COP27 in 2022, India reinforced its earlier commitments to support the target of 500 GW from non-fossil-fuel sources by 2030. To this end, expectations and hopes from the Union Budget 2023 are aplenty for a strong focus on green energy, and a greater thrust on climate action and sustainability.

Expansion of PLI schemes: The government has already announced PLI schemes to ramp up production in India. At present, the scheme covers 13 sectors and provides incentives to developers depending upon sales, performance criteria and local value addition.

The upcoming budget could see the announcement of PLI schemes that turn India into a green energy hub for domestic adoption and exports. Experts expect PLIs in advanced chemistry cell battery storage and for manufacturing of electrolysers.

“PHDCCI also recommends bringing the PLI scheme for wind turbine generators and equipment manufacturing in line with the solar PLI scheme. This will bring in technological advancement in the wind energy sector and also promote indigenisation,” says Saket Dalmia, President, PHDCCI (PHD Chamber of Commerce and Industry).
.
Carbon market: With climate change top of mind, countries and businesses the world over are setting up a roadmap to achieve their net-zero goals. An announcement on a national carbon market is expected this time around, which could facilitate India’s transition to a more energy-efficient economy with reduced emissions. It would also help industries align with environmental, social and governance (ESG) guidelines.

India, as per its energy bill, has already green-lighted the creation of a “carbon credit trading scheme”. In it, polluters will be able to exchange credits equivalent to a certain amount of emissions.

Renewable energy: There has been a strong focus on the production of renewable energy (RE) in recent years. The upcoming budget is likely to focus on strengthening the institutions, frameworks, and financial incentives on meeting overall RE targets. As per the CareEdge report, Budget 2023 will include: “a push towards investments in storage technology, green hydrogen and pumped hydro to enable scaling up of RE capacity.”

The report adds that while solar is expected to remain the mainstay in achieving the target of having 500 GW of non-fossil fuel power, sops such as concessional duties on the import of solar modules till the time sufficient domestic module manufacturing capacity are available could be introduced. At the same time, to revive the domestic wind sector, there could be a re-introduction of schemes like generation-based incentives.

“We expect higher capital allocation toward upgrading the transmission and storage network to maintain grid stability and balance. Further, the government should consider providing tax cuts/concessions such as reduced GST and basic custom duty on components used for renewable energy generation,” says Sharad Pungalia, CEO and MD, Amplus Solar.

Mission Life: In 2022, Prime Minister Narendra Modi launched Mission LiFE (Lifestyle for the Environment). The program is an India-led global movement to nudge individual and community action to protect and preserve the environment. Recently, the government also published a list of 75 climate-friendly practices that can be followed as part of the mission.

LiFE is expected to be a big priority in the coming year too, with the government focusing on how to roll out this mission in the next two years or so. To this end, specific outlays for different ministries could be announced to ensure effective on-ground implementation.

Businesses, especially those supporting e-commerce and food delivery, may be encouraged to transition to green fleets. The adoption of EV is expected to reduce air pollution and dependence on expensive oil imports.

Cut to Rs 8.5 crore last year, the biodiversity conservation budget is expected to increase in light of India's commitments at the UN Biodiversity Conference 2022. (Photo by Darshan Simha via Wikimedia Commons)

Green hydrogen: 2023 has already started with a bang, with the government announcing its National Green Hydrogen Mission; Rs 19,744 crore is earmarked for it, and it is expected to provide a major thrust to the energy sector.

The goal, however, is to produce 5 million tonnes of green hydrogen annually, meet at least 10 percent of global demand by 2030, and make India a hub for this green energy source. To this end, climate financing and mobilising more resources by increasing allocation in the PLI schemes for boosting the domestic manufacturing of green hydrogen and sustainable solutions could be announced.

Green bonds: In the last Union Budget, the government announced plans to issue the first SRGB. In November, the country’s final framework for sovereign green bonds was approved, which sets forth the obligations of the government of India as a Green Bond issuer. The RBI has also already said that there is also no foreign investment cap on the SRGB.

With ESG being one of the core agendas of the government, an announcement is expected on key environmentally sustainable and climate-suitable projects for which funds will be raised through green bonds. The areas could be renewable energy, energy efficiency, clean transportation, climate change adaptation, sustainable water and waste management, green buildings, and terrestrial and aquatic biodiversity conservation, among others.

Conservation: In Budget 2022, the budget for biodiversity conservation was slashed from Rs 12 crore to Rs 8.5 crore. In light of India's climate and biodiversity commitments at COP27 and the UN Biodiversity Conference in 2022, experts hope Budget 2023 will address this deficiency.

With increased awareness on environment and forest conservation, a well-defined policy for carbon credits and how it can be incorporated by the government, public and private organisations is also expected.

“To encourage transition to a low-carbon future and reinforce its importance, I’m also looking forward to seeing incentives for companies that are contributing to environmental good and sustainable living. Also, incentives for farmers who are a part of the timber cultivation would be a wonderful way to boost our local industry and reduce the dependency on imports,” says Bikrant Tiwary, CEO of Grow-Trees.com.