Impetus for Growth: Industry reactions to Union Budget 2022-23

Several major initiatives to facilitate energy transition and promote the renewable energy industry were outlined in the Union Budget 2022-23. The budget highlighted sustainability and climate change mitigation, with a particular focus on battery swapping for electric vehicles (EVs), local manufacturing of solar cells and modules, and co-firing of biomass pellets in thermal power plants. Excerpts from power industry reactions on the budget…

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 in this budget. The proposal to iss­u­e sovereign green bonds is a remarkable step for funding green infrastructure projects 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 promote the manufacturing of solar modules under the government’s flagship production-linked incentive (PLI) sche­me will also help ac­hieve the goal of 280 GW of installed solar capacity by 2030.

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 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 the 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.

Vipul Ray, President, Indian Electrical and Electronics Manufac­turers Association

IEEMA welcomes the Union Budget 2022-23. Its clear focus on energy transition through various measures that give an impetus to solar energy, storage, battery and e-mobility will pave the way for ac­hieving India’s clean energy and climate change commitment. The zero fossil fuel policy, battery swapping policy and focus on charging infrastructure for the EV ecosystem will provide an impetus to a future-ready electrical and allied electronics sector. IEEMA welcomes the increased focus on in­frastructure through the Gati Shakti master plan and atmanirbharata in de­fence, which will open up more business opportunities for the electrical and alli­ed electronics industry. The introduction of the e-bill system for reducing de­lays in payments is a progressive step. IEEMA thanks the finance minister for her announcement allowing the use of surety bonds as a substitute for bank guarantees as ac­ceptable in governme­nt procurements. This will improve the working capital of suppliers and work contractors. This has been IEEMA’s long-standing demand.

Kush Singh, Chief Executive Officer, Essar Power

The Union Budget 2022-23 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 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 environmental, social and governance (ESG) and renewables going forward. Also, the move to frame a battery swapping policy for EV charging stations and 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.

Shalabh Srivastava, Country Director, RTI International, India

While it enjoyed some “Saubhag­ya”, ­In­di­a’s ­power sector did not “UDAY” as much as it could have (pun fully intended). The dilemma between energy security (read dependence on indigenous coal) and clean energy (shift to re­newables) continues to swing the proverbial pendulum bet­ween the 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 the energy sector: The current government had started well with consolidating po­w­er, renewables and coal under one minister. The right direction should have been to put petroleum and natural gas in that bouquet and appoint one en­ergy minister to handle all four portfolios. The future roadmap should inclu­de merging the ministries rather than just appointing a common minister.
  • Coal gasification for power generation and methanol production: Since it would involve the 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 the me­th­anol economy beyond sporadic pi­l­ots. This one initiative can single-ha­n­dedly solve multiple conflicting pro­blems – revive the coal sector, mini­mi­se air pollution (PM, not GHG), substitute part of imported crude with in­di­genous coal, minimise diversion of edible crops to ethanol production and th­ereby conserve groundwater, to na­me a few. Interna­tional collaboration for technology adoption is the way to go.
  • Revamp the power distribution sector, yet again: While various distribution refor­m schemes have been well conceived by the centre, they have been ex­ecuted poorly by most states. The panacea that is being touted around for this paradox is privatisation. Surely, the privatisation of state discoms is a necessary step, but it is not sufficient – partly due to sheer scale and partly be­cause most private licensees are only interested in urban areas (like Chan­di­garh), which leaves out 70-80 per cent of India. So the alternative “panacea” here is to train, motivate and empower discom employees to enable them to turn around their own operations. KESCO has proved that in the past. Cu­rrently, a pilot on the emplo­yee-ownership-bas­ed distribution re­form model is being con­ducted in certain rural areas of Bharatpur district. We need more such organic reforms to re­vamp the distribution sector from the inside out, rather than outside in.
  • Charge up charging infrastructure: The irony about EVs is that the “vehicle” itself has made the most progress, and is now least of the bottlenecks. The bottleneck in scaling up EVs 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 paperwork of policymaking. It is high time the government announces a mega-plan for implementing “million charging stations” as part of the 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, decentralised source of renewable energy. Like coal gasification, geothermal energy is also an area ripe with opportunity for international collaboration on technology adoption.

N. Venu, Managing Director and Chief Executive Officer, India and South Asia, Hitachi Energy

India delivered a pro-growth budget with a significant push to capital expenditure to support the supply side and attract private investment. The government has 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 towards 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-generation trains over the next three years, the Rs 14 billion allocation for hydro and solar projects in the financial year 2023, the rationalisation of custo­ms duties on select capital goods, and wider coverage of single-window clearance for green projects will pave the way for clean energy transition. A clear emphasis on technology and digitalisation with due consideration to upskill­ing the youth and research and development to build back better are big positives. 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 be work in progress. The government has laid out the blueprint for growth over the coming two to three decades.

The government has an 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 infrastructure. The 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 a world-class stature.

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