Union Budget 2022-23 announced several key provisions for enabling energy transition and expanding the clean energy sector. From battery swapping for EVs and domestic manufacturing of solar cells and modules to co-firing of biomass pellets in thermal power plants, the budget focused on sustainability and climate change mitigation. Here is a quick summary of budget reactions from power sector leaders….
Mahesh Palashikar, President, GE, South Asia
I am happy to see this year’s union budget laying out a blueprint for future sustainable development. We applaud the government for its consistent commitment and sharp focus on the important priorities of improving climate change and accelerating energy transition. The suggested framework around Gati Shakti (infrastructure development) and inclusive development will lay a good foundation for long-term infrastructure development with an eye on short-term economic and job growth. We also welcome the actions on the national digital health mission.
The launch of sovereign green bonds is evidence of the government’s active support to go “green”, which will significantly help reduce carbon intensity in the years to come. For India to achieve its climate goals, financing is the need of the hour. This will require deep public-private partnerships. We, at GE, have been investing in sustainable technologies for decades. We welcome the encouragement to private industry for taking up the design and development of military platforms and equipment in collaboration with DRDO. We are committed to bringing those technologies in the areas of sustainable aviation, green hydrogen, emission control and decarbonisation to India to support the country’s goals.
Kush Singh, Chief Executive Officer, Essar Power
The Union Budget 2022 is a welcome move and continues to provide an impetus to growth, especially in the energy and power sector. Two of the four pillars of development by the government are energy transition and climate action, which are extremely important for the sustainable progress of the economy. The low-carbon development strategy shows the strong commitment of the government to a greener future. The allocation of Rs 14 billion towards hydro and solar projects is in line with the government’s ambitious vision of increasing the installed renewable capacity by 280 GW by 2030. The additional allocation of Rs 195 billion for PLI incentives in solar module manufacturing and conversion of coal into chemicals, are bold steps taken by the government in anticipation of the shift in the energy sector, with a strong focus on ESG and renewables going forward. Also, the move to frame a battery swapping policy for EV charging stations and to issue sovereign green bonds for funding green infrastructure will provide a big boost to the economy by reducing the carbon intensity and will lead to positive environmental and climate effects.
N. Venu, Managing Director and Chief Executive Officer, India & South Asia, Hitachi Energy
India delivered a pro-growth budget with a significant push to capital expenditure to boost the supply side and attract private investment. The government appears to have had its ear to the ground and covered a vast gamut of sectors in its four priority areas — PM Gati Shakti, Inclusive Development, Climate Action, and Energy Transition. Its intentions have been clear – steer India toward sustainable development with a strong focus on financial support to MSMEs and expansion of emerging sectors such as solar power, EV infrastructure, railways, and data centres.
The additional allocation of Rs 195 billion for the PLI scheme, the development of new-gen trains over the next three years, the Rs 14 billion allocation for hydro and solar projects in FY2023, the rationalisation of customs duties on select capital goods, and wider coverage of single-window clearance for green projects will pave the way towards clean energy transition.
The clear emphasis on technology and digitalisation with due consideration to upskilling the youth and research and development (R&D) to build back better are big positives. While some important elements such as a new SEZ legislation, funding schemes for new metro rail systems and cleantech, urban planning to promote sustainable living, and the battery swapping policy appear to work in progress. The government has laid the blueprint for growth over the coming two-three decades.
The government has unambiguous intent to achieve its COP26 ambitions through key proposals such as urban planning, energy efficiency, increased budget for PLI, distributed grids for remote villages and finance to enable these through new climate finance services, and categorisation of grid-scale BESS as harmonised infra. Focus on standardised and efficient mass transport metro and rail will help normalise costs. The battery swapping and interoperability proposals for EVs are a way of triggering adoption, which will then create enough demand for technology evolution. MSME ratings will help calibrate the Indian supply chain to world class.
Vimal Kejriwal, Managing Director and Chief Executive Officer, KEC International Limited
I welcome the forward-looking, capex-led Union Budget 2022, with a sharp 35 per cent increase in outlay. A strong focus on improving the safety of Indian Railways, faster implementation of metro rail systems, infrastructure status for data centres, along with the emphasis on PM Gati Shakti with significant allocation for the Jal Jeevan Mission, Affordable Housing and BharatNet, as well as the building of 100 cargo terminals for multimodal logistics facilities augur well for KEC International Limited and our well-diversified businesses.
Further, initiatives such as the use of surety bonds as a substitute for bank guarantees, a cap on surcharge of AOPs/consortiums at 15 per cent as against 37 per cent earlier, and an end-to-end online e-bill system to enhance transparency are steps in the right direction for EPC contractors such as KEC.
Manish Chourasia, Managing Director, Tata Cleantech Capital Limited
The finance minister’s announcement to issue sovereign green bonds to mobilise the resources required for green infrastructure will certainly help boost clean energy project financing, thereby providing an impetus to the Indian energy sector. With the approved module manufacturer list becoming applicable from April 2022, the allocation of an additional Rs 195 billion under the PLI scheme for solar would help create a much-needed manufacturing ecosystem. The enhanced focus on electric mobility is showcasing the clear desire to mainstream this emerging industry. Overall, the budget is giving clear direction for India to meet its COP26 commitments by 2030.
Ashish Bhandari, Managing Director and Chief Executive Officer, Thermax Limited
The Union Budget is a promising one, looking to build long term growth as the economy recovers from the impact of the COVID-19 pandemic.
Specifically for the energy sector, there are many positives from this Budget. The Sovereign Green Bonds is a remarkable step for funding the projects with a focus on using cleaner alternatives in every sector. This will help reduce the overall carbon footprint of the Indian economy and help achieve the renewable energy target of 175 GW by the year 2022.
The additional allocation of Rs 195 billion to boost the manufacturing of solar modules under the government’s flagship PLI scheme will also help achieve the goal of 280 GW of installed solar capacity by 2030.
Vipul Ray, President, Indian Electrical and Electronics Manufacturers Association
IEEMA welcomes the Union Budget 2020. Its clear focus on transition on energy transition through various measures that give boost to solar energy, storage, battery and e-mobility will pave the way to achieving India’s commitment on tackling clean energy and tackling climate change. The zero fossil fuel policy, Battery swapping policy and focus on charging infrastructure for EV ecosystem will provide the impetus to a future ready electrical and allied electronics sector. Mr Ray mentioned this in the IEEMA interaction on Union Budget with captains of the electrical industry. IEEMA welcomed the increased focus on Infrastructure through Gatishakti master plan and Atmanirbharata in Defence that will open up more business opportunities for electrical and allied electronics industry. The introduction of e-Bill System for reducing delays in payments is a progressive step. IEEMA thanks the Hon’ble Finance Minister for her announcement allowing use of surety bonds as a substitute for bank guarantee as acceptable in Government procurements. This will improve the working capital of suppliers and work contractors. This has been IEEMA’s long standing demand.
Shalabh Srivastava, Country Director – Research Triangle Institute (RTI International), India
While it did enjoy some saubhagya, India’s power sector did not uday as much as it could (pun fully intended). The dilemma between energy security (read: dependence on indigenous coal) and clean energy (read: shift to renewables) continues to swing the proverbial pendulum between net zero commitment of COP26 and the harsh geo-economic realities. Here are five tips to refresh the thinking in the corridors of “power”:
- Structural alignment across “Energy” sector: The current Govt. had started well with consolidating power, renewables and coal under one minister. Instead of separating them back, the right direction should have been to put petroleum and natural gas also in that bouquet and appoint one Energy Minister to handle all four portfolios. Future roadmap should include actually merging the ministries rather than just appointing a common minister.
- Coal gasification for power generation and methanol production: Since it would involve coal, power and petroleum ministries to work together, “Methanol Economy” could not really scale up despite NITI Aayog’s best efforts. A single minister across all these ministries can hopefully scale up Methanol Economy beyond sporadic pilots. This one initiative can single-handedly solve multiple conflicting problems – revive coal sector, minimize air pollution (PM, not GHG), substitute part of imported crude with indigenous coal, minimize diversion of edible crops to ethanol production and thereby conserve ground water, to name a few. International collaboration for technology adoption is the way to go.
- Revamp Power Distribution Sector, Yet Again: The key lies in execution. While various Distribution reform schemes have been well conceived by the Centre, they have been executed poorly by most States. And the panacea that is being touted around for this paradox is privatization. Surely, privatization of State DISCOMs is a necessary step, but it is not sufficient – partly due to sheer scale (100+ DISCOMs) and partly because most private licensees are interested in urban areas only (like Chandigarh), which leaves out 70-80% of India. So the alternative “panacea” here is to train, motivate and empower the DISCOMs’ employees to enable them to turn around their own operations. KESCO (Kanpur DISCOM) proved that in the past. Currently, a pilot on Employee-Ownership based Distribution Reform model is being conducted in certain rural areas of Bharatpur district. We need more such organic reforms that endeavour to revamp distribution sector from inside-out, rather than outside-in.
- Charge up the charging infrastructure: The irony about Electric Vehicle (EV) is that the “vehicle” itself has made the most progress, and is now least of the bottlenecks. The bottleneck in scaling up EV in India is the surrounding ecosystem or lack thereof, especially chargers, charging technology, communication protocols and charging infrastructure. What should have become an omnipresent phenomenon by now – like petrol or diesel outlets – is still grappling under the paper-work of policy-making. High time Govt. announces a mega-plan for implementing “million charging stations” as part of Azadi ka Amrit Mahotsav.
- The fifth element is missing: We have harnessed electricity from Agni (thermal), Jal (hydel), Vayu (wind) and Akash (solar), but not tried much with Prithvi (geothermal). With no problem of intermittency and no dependence on energy storage, geothermal power generation can provide an indigenous, omnipresent, decentralized source of renewable energy. Like coal gasification, geothermal energy is also an area ripe for international collaboration for technology adoption.
Jaideep Mukherji, Chief Executive Officer, Smart Power India
Budget 2022 has clearly laid a major focus on the green energy transition, reducing carbon footprint, and inclusive economic growth. As we move towards a greener economy, the role of Distributed Renewable Energy as a catalyst in the empowerment of MSMEs, job creation, and reforms in agriculture will be crucial. New initiatives to encourage productive use of clean energy in rural areas driven by DRE can be of great value to the rural as well as the national economy.
Ravichandran Purushothaman, President of Danfoss India
We welcome the progressive and growth-oriented budget presented by the Finance Minister Nirmala Sitharaman for 2022-23. As part of India’s new blueprint of infra growth for the ‘Amrit Kaal’, the increased capital expenditure, 35.40 percent above last year, will create more infrastructure, which will have a huge multiplier effect on the economy. With economic growth pegged at 9.2 per cent, ahead of other large economies, and a sharp focus on sustainability and circular economy, India is well poised to withstand the challenges and reach closer to the $5 trillion GDP ambition.
With capital expenditure estimated at Rs 10,680 billion for 2022-23, the government has laid out the roadmap to boost India’s holistic growth. The Budget has also given the much-needed impetus to India’s agriculture and education sector with measures such as 2,370 billion direct MSP payment to farmers, DESH stack, One Class One Channel. By promoting chemical – free natural farming, industries can now lead the way in boosting sustainable productivity and increased income of farmers.
While the highlight of the budget was on healthcare and infrastructure sector, some prudent initiatives for MSMEs and India Inc for start-ups have also been announced. The announcements related to green bonds and energy savings for commercial buildings, highlights India’s commitment towards reduction of carbon emissions.
To facilitate energy management, Government of India has promoted the adoption of the Energy Service Company business model for large commercial buildings. By enabling capacity building and energy audits, performance contracts, common measurement and verification protocols, this service helps in imbibing energy savings as a core value in industries across India. By providing major financial allocations to energy efficiency and data centres the path towards clean energy storage is clearer than ever. We hope that Budget 2022 acts as a guiding force to lead our government’s ‘India@100’ initiatives.
Manish Dabkara, Chairman and Managing Director and Chief Executive Officer, EKI Energy Services Limited
The Union Budget 2022 is truly historical given its strong focus on climate action for the first time ever and large allocations for various sectors that enable climate-friendly sustainable development. We wholeheartedly welcome the Union Budget 2022 and it is truly a delight for us that energy transition and climate action have been recognised as two important pillars in the budget this year, establishing India’s commitment to sustainable development by mitigating global warming. The budget’s strategic blueprint for climate action will truly enable low-carbon development in India, supporting the Panchamrita commitment made by PM at COP26.
Having said this, while the government is striving in the right direction with a climate-friendly growth plan, there is still a long way to go for a climate-proof budget. Climate actions will need strategically designed guidelines and policies along with a well-defined roadmap that can help us achieve the net-zero target. There should also be greater clarity and focus on the taxation of carbon finance and offsets along with incentivisation of the sector, which can drive a focused modus operandi for the achievement of the net-zero target by 2070.
- Budgetary allocation in Anganwadi development with clean energy facilities is an important step towards enabling clean equitable development in rural India. This is an impressive step by the government towards its commitment to net-zero by 2070 as clean energy will reduce pollution levels even as villages become self-sustainable with their use of clean energy.
- The allocation of Rs 14 billion for the development of solar and hydro projects in Ken Betwa river-linking projects will further enable sustainable development. This, along with the target to increase solar power capacity to 280 GW by 2030 from the existing 141 GW, is a truly welcome step. The government and the private sector will need to work together for a public-private partnership (PPP) to achieve this target and the government should provide more incentives by way of a relaxation in taxation, ensuring land availability and providing policy guidelines on carbon offsets to encourage companies to increase the production of solar power and achieve this target.
- Rs 190 billion PLI for solar panels will need increased focus. There is an urgent need for supportive infrastructure as well as an economic ecosystem that will enable the manufacturer, the buyer and the service provider to come together to achieve the solar power production target.
- The promotion of clean technology in public transport will enable sustainable growth as clean energy is used increasingly. This should, however, also encourage efficient waste management and an increased dependence on renewable power by the country. The project should also be financially feasible for which we should adopt carbon financing for green initiatives.
- Gati Sakti will encourage a strong pathway towards environment-friendly transportation development.
- Energy efficiency as the basis for railway development, especially in running freight and passenger trains, will also enable efficient and carbon-friendly development. Special mobility zones with zero fossil fuels in urban development shows the commitment of the government towards greenhouse gas abatement.
- Chemical-free natural farming within a 5 km wide corridor of River Ganga is a step towards sustainable and climate-resilient farming practices. The allocation of programmes supporting agri-waste management will directly address stubble burning that will help reduce many million tonnes of carbon emissions.
- Green bonds will help focus on carbon intensity reduction projects. Sustainable and climate finance institutions will be set up to mobilise finance for clean development.
- The government will also pay Rs 2,370 billion towards the procurement of wheat and paddy under MSP operations. This, however, needs proper market linkage and established demand for the produce that can motivate farmers to focus more on improving practices in cultivation and making farmlands more sustainable.
Animesh A. Damani, Managing Partner, Artha Energy Resources
The sheer inclusion of renewable energy (RE) and cleantech in the Union Budget 2022-23 speech by the Hon’able Finance Minister is a clear indicator of the increased prominence that the RE segment has had in the last few years! The sector has grown by leaps and bounds, thus establishing a formidable position.
The focus on electric vehicles (EVs) and energy storage solutions (ESS) is clearly the need of the hour. The introduction of a battery swapping initiative is in line with our expectations. Interoperability of energy storage is going to revolutionise the consumption of RE in India. It is not only going to improve the logistics for EV users, but also create a micro-economy, which will create budding entrepreneurs in the segment.
Moreover, the Hon’able Finance Minister has granted ESS and grid-scale battery systems “infrastructure” status, which has been done largely to boost demand. This move is bound to attract better financing options for this segment and increase scalability, which, in turn, will eradicate the barrier of discoms not opting for RE on account of intermittent supply.
On the accountability front, I truly hope that the forward-looking move by the central government to introduce end-to-end online e-billing trickles down and is implemented by central agencies such as SECI and IREDA. This will improve the payment cycles and the financial standing of power generation companies.