Budget 2024: Hope for a Greener Future!

Geopolitically, global affairs are becoming more challenging and complex with wars and conflicts. Globalization is being redefined with reshoring and friend shoring, disruption and fragmentation of supply chains and competition for critical minerals and technologies. A new world order is emerging after the Covid pandemic,” Finance Minister Nirmala Sitharaman said in her interim Budget, which she presented on February 1.

She went on to say, “India assumed G20 Presidency during very difficult times for the world. The global economy was going through high inflation, high interest rates, low growth, very high public debt, low trade growth, and climate challenges. The pandemic had led to a crisis of food, fertilizer, fuel and finances for the world, while India successfully navigated its way…”

The statement from the Finance Minister assumes significance as India meets close to 88 per cent of its crude oil requirements through imports. And any fluctuations in crude oil price, which is highly volatile and unpredictable, impacts the fiscal math of the country.

This is one of the reasons why India has been focusing on energy transition. In fact, in her Budget last year (202324) she had provided for ?35,000 crore for priority capital investments towards energy transition and net zero objectives, and energy security by the Ministry for Petroleum and Natural Gas. Of this, ?30,000 crore was towards capital support to public sector oil marketing companies — Indian Oil, Hindustan Petroleum and Bharat Petroleum — for green energy and net zero initiatives and the remaining for purchase of crude oil for caverns at Mangalore and Visakhapatnam. Subsequently, based on the recommendations of the Expenditure Finance Committee the support to oil companies was halved and plans to fill the strategic reserves deferred.

A reason for this could be the changing dynamics in the oil world. But continuing with the energy transition story in the latest interim Budget, she announced:

RENEWABLE ENERGY AND CLEAN TECHNOLOGIES

• The budgetary estimates for the central sector scheme on grid-based solar power have more than doubled to Rs 10,000 crore in 2024-25 from the revised estimates of about Rs 4,757 crore in 2023-24. On the other hand, the outlay for wind power stayed almost the same — Rs 930 crore in 2024-25 against Rs 916 crore in 2023-24.
• The rooftop solar programme, PM Suryodaya Yojana, of the central government will enable 10 million households to obtain up to 300 units of free electricity every month, the finance minister mentioned in her speech. This initiative will save households up to Rs 15,000-18,000 annually, both from free solar electricity and selling surplus energy to distribution companies, she added.
• Viability gap funding has also been announced for the initial addition of up to 1 GW in offshore wind energy capacity. The Union government introduced the country’s first-ever tender last year to allocate sites for offshore wind energy projects. While the country has an installed wind capacity of 43.7?GW, it is currently limited to land-based wind projects.
• The budget for National Green Hydrogen Mission to develop green hydrogen has been increased to Rs 600 crore in the upcoming financial year from Rs 100 crore estimated in 2023-24.

TRANSPORT AND E-MOBILITY

• To address the challenges of scaling up e-buses, the budget discussed support through payment security mechanisms. PSM, a capital reserve, offers interest-free capital to projects in the event of default.
• While Sitharaman emphasised the e-vehicle ecosystem in the budget speech and the government’s intent to support charging infrastructure and the e-buses network, the budgetary estimate for the Scheme for Faster Adoption and Manufacturing of (Hybrid and) Electric Vehicles in India (FAME-India) has been reduced to Rs 2,671 crore in 2024-25 from Rs 4,807 crore in 2023-24.?
• FAME-India is a scheme aimed at introducing electric / hybrid transportation under the National Electric Mobility Mission Plan Scheme.
• In the context of biofuels and blending, the phased mandatory blending of compressed biogas (CBG) with compressed natural gas (CNG) for transportation and piped natural gas or PNG for domestic purposes will be mandated. Although compositionally similar, CBG is produced from biomass, while CNG is a by-product of petroleum.

BLUE ECONOMY 2.0

• The budget also discussed climate resilience and blue economy. In line with this, a scheme for restoration, adaptation, coastal aquaculture and mariculture with a multi-sectoral approach will be launched, the FM stated. The concept of Blue Economy 2.0 is interconnected with the Blue Revolution, which focuses on the productivity of the fisheries sector. The budget estimate for the Blue Revolution has been increased to Rs 2,352 crore in 2024-25 from Rs 1,500 crore in 2023-24.
• In terms of ministerial allocation, MoEFCC has been allocated a higher budget estimate of Rs 3,265.53 crore compared to Rs 3,079.4 crore in 2023-24. Additionally, the budget estimate for MNRE has increased to Rs 12,850 crore in the latest budget from Rs 10,222 crore in the previous year.

On paper, all this sounds good. But in the energy space, States also play a vital role and not all of them will follow this narrative. According to Gaurav Kedia, Chairman Indian Biogas Association, “Agriculture residue like paddy straw, often burned, holds immense potential for bioenergy and soil health. Yet, procurement faces hurdles, including unattractive economics, due to which farmers would rather burn in order to dispose of the straw from the field in a timely manner.”

Investing in logistics would also not be an option due to the straw’s low density, which makes collection, storage and transport expensive, he said, adding,

“The government intervention is crucial to incentivise the required machinery, e.g., subsidise combine harvester, which can efficiently collect straw. Further support for balers and storage units would facilitate efficient transportation and storage.” Still, the proper mechanism for buyback programmes is lacking, which can offer guaranteed, fair prices to incentivise the sale of biomass over burning. Investing in the right machines is key to unlocking paddy straw’s potential, creating a win win for farmers, the government, environment, and energy security, he added.

• Despite increased allocation, the Budget needs to ensure long term financing solutions to bridge the investment gap for largescale renewable energy projects, he said, adding that while PLI schemes exist, further incentives are needed to boost domestic manufacturing of critical components, reducing dependence on imports.
• The Market Development Assistance scheme is supporting the fermented organic manure coming out of biogas plants, but a scheme similar to SATAT for biofertilizer is still missing. At this crucial juncture, it’s quintessential to value the green component of CBG in form of tradable CBG certificate too.
• In order to ensure a smoother implementation of the PM Suryodaya scheme, the government should constitute a body on the lines of the GST Council with States as members so that uniformity in terns of regulations and policies is in place. This is needed to accelerate India’s energy transition.
• The residential rooftop solar programme has always got the push from the government but solar has to grow beyond that and penetrate into the commercial space.
• In a way the government is trying to solve the huge subsidy which the category gets with schemes like Kusum for farmers. But till open access does not become a complete success, the solar sector will not grow at the desired pace.

While the government has been working towards enhancing the country’s energy ecosystem on the ground, challenges remain. These are mainly infrastructural — for example, in solar it is about storage and grid. Pricing of these energy sources is also an issue which the government will need to address.

For India, a way out will be to work on the entire ecosystem in totality instead of working on each aspect of the energy sector in isolation.