Budget's take on India’s Climate Action: Balancing Ambition with Practicality

During her budget speech, Finance Minister Nirmala Sitharaman put energy security front and center. It was interesting to see that the government is approaching the complex issue of climate action through all possible angles: mitigation, adaptation and resilience.

Focus on Climate Resilient Agricultural Innovations

India’s move to overhaul agriculture research aims to boost productivity and develop climate-resilient crops. By involving private players and experts, this step towards preparing our farmers against changing climate complexities promises innovative solutions. The release of 109 new high-yielding, climate-resilient crop varieties is a solid step to help farmers adapt to changing climates. However, key would be to ensure these new varieties reach smallholder farmers alongwith appropriate capacity building which will be crucial for its widespread impact.

The ambitious goal to initiate 10 million farmers into natural farming over the next two years, backed by certification and branding, is exciting. Establishing 10,000 bio-input resource centers will support this shift towards sustainable practices. Yet, the success of natural farming hinges on extensive training and continuous support, making it a significant challenge.

Developing large-scale vegetable clusters near major consumption centers is a welcome step. This will reduce transportation emissions and provide fresher produce. As per a recent study by NABARD Consultancy Services (NABCONS), India suffers an annual monetary food loss of ~USD 6.8 bn in just fruits and vegetables due to lack of proper storage and transportation.

Encouraging Farmer-Producer Organizations, cooperatives, and start-ups to manage these supply chains is a practical approach. However, integrating these clusters seamlessly into existing supply chains and providing necessary infrastructure like cold storage and green logistics solutions are vital to minimizing the carbon footprint.

Strengthening Critical Minerals Trade

The government is now shifting gears towards securing Critical Minerals. It is a strategic move to secure essential resources for renewable energy technologies through domestic production, recycling, and overseas acquisition.

In a forward-thinking move, the latest budget has completely exempted customs duties on 25 critical minerals, including lithium, copper, cobalt, and rare earth elements. These minerals are crucial for advancing sectors like nuclear energy and renewable energy. By making it easier and more affordable to access these essential materials, the government aims to create a conducive ecosystem for their processing, refining, and availability within India.

Securing Energy Generation and Storage

It was clear that the government is focusing comprehensively on building the Renewable Energy ecosystem. The PM Surya Ghar Muft Bijli Yojana, which aims to provide free electricity up to 300 units monthly through rooftop solar installations, has seen over 12.8 million registrations. Continued encouragement and expansion of such initiatives is crucial.

Furthermore, the government is giving a big boost to the solar industry by waiving the basic customs duty (BCD) on certain machinery and equipment used in manufacturing solar cells and modules. Previously taxed at 7.5%, this duty exemption will help lower costs for solar manufacturers, making clean energy even more affordable.

Another interesting update came in the form of promoting pumped storage projects for electricity storage through a policy document as well as support for small modular nuclear reactors.

However, the announcement of a 2400 MW power plant at Pirpainti, costing ?21,400 crore, raises certain environmental concerns, especially when Bihar has a decent solar insolation. Investing in large-scale fossil fuel projects seems counterproductive in an era of climate urgency.

Industry and Climate Finance

Shifting 'hard to abate' industries from energy efficiency targets to emission targets and transitioning to the Indian Carbon Market is necessary for deeper decarbonization. The move towards creation of a roadmap is important, however, it would be heartening to see if the roadmap leads to implementation as well. Supporting traditional micro and small industries with energy audits and financial assistance to adopt cleaner energy can lead to substantial emission reductions and enhance their competitiveness.

Developing a taxonomy for climate finance to enhance capital availability for climate adaptation and mitigation is crucial for meeting climate commitments. This initiative can attract more investments in green projects, accelerating the transition to a low-carbon economy.

While overall reaction to the budget is debatable, the focus on energy security and clean energy transition is evident. While many initiatives show promise and align well with climate action goals, prioritizing implementation is key.