Green Growth: Industry reactions to Union Budget 2023-24

As a part of the Union Budget 2023-24, the finance minister has announced several key measures that build on the government’s focus on green growth.

Key announcements

  • National Green Hydrogen Mission will facilitate the transition of the economy to a low carbon intensity and reduce dependence on fossil fuel imports. India targets to reach an annual production of 5 mt by 2030.
  • An allocation of Rs 350 billion has been proposed for priority capital investments towards energy transition and net zero objectives, and energy security by Ministry of Petroleum and Natural Gas. Further, battery energy storage systems with capacity of 4,000 MWh will be supported with viability gap funding.
  • The inter-state transmission system for evacuation and grid integration of 13 GW renewable energy from Ladakh has been proposed with an investment of Rs 207 billion including central support of Rs 83 billion.
  • Additionally, a Green Credit Programme has been proposed to be notified under the Environment (Protection) Act for encouraging behavioural change by incentivising environmentally sustainable and responsive actions by companies, individuals and local bodies.
  • To further provide impetus to green mobility, it has been announced to extend the custom duty exemption for import of capital goods and machinery required to manufacture lithium-ion cells for batteries used in electric vehicles.

Budgetary allocation

  • For 2023-24, the net budgetary allocation for the Ministry of Power has been pegged at Rs 206.71 billion (as against Rs 160.74 billion budgeted in 2022-23). The total investment by its eight state-owned power companies has been proposed at Rs 608.05 billion for 2023-24 (as against Rs 514.70 billion budgeted in 2022-23).
  • The net budgetary allocation for the Ministry of New and Renewable Energy has been pegged at Rs 102.22 billion for 2023-24 (as against Rs 69 billion budgeted in 2022-23).
  • Nuclear Power Corporation of India Limited (NPCIL) received an allocation of Rs 94.10 billion for 2023-24. Additionally, NPCIL will raise Rs 128.63 billion through internal and extra budgetary resources. Meanwhile, the Department of Atomic Energy has been allocated Rs 250.78 billion.

Here is a quick summary of reactions to Union Budget 2023-24 from power sector leaders….

Pratik Agarwal, Managing Director, Sterlite Power, and Director of Serentica Renewables

The budget has laid down a promising path for the nation’s green growth, clearly identified as one of the seven pillars, with sizable outlay of Rs 35,000 crore. The finance minister has also focussed on some of the key issues like battery storage and pumped storage projects to ensure stable and round the clock supplies from renewable resources like solar and wind power. Additionally, the reduction in duties for lithium-ion batteries is a step in the right direction. It has also ushered in a key measure for the financial health of states’ distribution utilities by tying 0.5% of their deficit to power sector reforms. This is an added incentive for the states to reform the DISCOMs. However, along with incentive, a disincentive package for the discoms would have proven beneficial. Power sector also merited a bigger budgetary allocation given it is the fuel that is driving India’s growth engine. Overall, the budget has pushed all the right buttons and is well in line with the macroeconomic goals of the country.

Bhupesh Arora, Business Head, Digital Energy, Schneider Electric India

The Union Budget 2023 demonstrates the government’s commitment to building and expanding the infrastructure sector to boost the economy.  We welcome the government’s move to announce an enhanced outlay on capital investment by 33.4% to Rs. 10 lakh crore, for the infrastructure sector. This will result in more employment creation, increased manufacturing capacities, and the energy sector’s active participation in nation building. The budget focuses on states and cities to encourage urban planning reforms and making cities more sustainable. We applaud the government’s investment of Rs. 35,000 crore to achieve energy transition and net zero goals, and we note that green growth is one of the government’s seven priorities.

S N Goel, Chairman and Managing Director, Indian Energy Exchange Limited

The Union Budget 2023 has outlined a strong foundation for the Indian energy sector, with green growth emphasised as a priority for the government. The 35,000-crore allocation for energy transition, focus on promoting green hydrogen and incentivising environmentally sustainable actions through the green credit programme, will accelerate decarbonization of the power sector. The emphasis on energy storage projects, critical to scale up renewable energy capacity, complements India’s net-zero carbon emissions target of 2070.

With the positive direction provided by the Union Budget 2023, IEX will continue to support the government and industry through new initiatives and technological innovations in energy market.

Sabyasachi Majumdar, Senior Vice President & Group Head – Corporate Ratings, ICRA Limited

The budget’s focus on green growth reinforces the commitment towards achieving energy transition in the long run. The announcement of a Viability Gap Funding (VGF) scheme for battery energy storage projects and the stated intent of coming out with a framework for pumped hydro projects is a positive for the RE energy sector, given the importance of storage for RE sources, which are intermittent in nature. However, the fleshing out of the details is awaited; and timely implementation of these measures will remain crucial. The proposal for investment in transmission lines for large scale evacuation of green power from Ladakh is likely to support RE capacity addition and grid integration. The already announced National Green Hydrogen Mission with a target to produce 5 MMT of Green Hydrogen is also a positive, although the cost competitiveness of the same remains a key monitorable. The increased budgetary allocation (Rs. 160 billion, 67% increase over FY 2023 RE) under reform lined result-oriented capex scheme is likely to enable state discoms to augment their infrastructure & thus reduce their operational inefficiencies.

Sunil Mathur, Managing Director and Chief Executive Officer, Siemens Limited, India.

The inclusive, growth-oriented Budget builds on the foundation of previous years and is consistent with the Government’s efforts to maintain macro-economic stability while focusing on growth. The increase in investments in capital infrastructure, including ‘Green Growth’, sustainable cities and railways & transport infrastructure will give the necessary boost to the domestic economy. I also welcome the enhanced support for MSMEs, exports, domestic manufacturing and value-add, technology and youth, which are all imperative to maintain India’s economic growth.

Rajiv Mishra, MD, Apraava Energy 

Hon’ble Union Finance Minister Smt Nirmala Sitharaman’s continuation of 50-year interest free loan to state government for one more year for spurring investment in infrastructure is encouraging and will certainly serve the purpose of incentivizing state for complementary policy actions. The increased outlay of Rs 1.3 lakh crore will allow states to continue working on power distribution reforms and enhance power infrastructure including installation of smart meters. The government has allotted higher amount of Rs 12,072 crore for reform linked power distribution scheme as against Rs 6,000 crore spending estimated for the current 2022-23. This doubling of allocation should help in increasing power supply situation as well as help discoms to move towards a healthier market.

The proposed inter-state transmission system for evacuation and grid integration of 13 GW renewable energy from Ladakh at the cost of Rs 20,700 crore will facilitate in development of large RE projects in UT which is endowed with abundant solar and wind potential. Above all, the signaling effect of the FM announcing Green Growth as a specific objective of the government will go a long way in giving confidence to the Industry in continuing to Invest in Energy Transition

Rahul Munjal, Chairman & Managing Director, Hero Future Energies

Union Budget 2023 focuses on continuing the momentum towards a sustainable India. By earmarking green growth as one of the 7 key priorities, the Government has reaffirmed its commitment to decarbonization and creation of green jobs. The allocation of Rs. 35,000 Cr. for priority capital investment towards energy transition will help catalyze our Net Zero journey. Viability Gap Funding for battery storage projects, significant outlay for grid expansion for Renewable energy and the green credit programme to incentivize sustainable behavior are all very welcome and timely steps that will accelerate clean energy adoption. The PM PRANAM scheme will boost the usage of green ammonia for production of environment friendly fertilizers. The policy for scrapping old vehicles and customs duty exemption on Li-ion batteries will also help fast track EVs and clean up the mobility sector.

While all the above announcements are very good and desirable, we would also like to see some additional measures such as extending PLI scheme to manufacturing of wind turbines and electrolyzers, reducing GST on sale of renewable energy components and O&M costs, enabling low-cost project financing, deferring BCD on solar modules and cells till the domestic manufacturing ecosystem matures and establishing a stronger mechanism for monetizing carbon credits. I would also like more clarity on how the Govt. plans to achieve the target of producing 5 MMT of Green Hydrogen by 2030, especially on matters such as green hydrogen consumption mandates and its transport and storage options, among others.

N Venu, MD and CEO, India and South Asia, Hitachi Energy

Infrastructure: India needs commensurate infrastructure development to reach its goal of becoming a 5 trillion economy. Over many years, the governments have been investing in capex, pumping the much-needed energy to keep the economy sanguine. This is well reflected in the Economic Survey of 2022-23; Capital Expenditure (Capex) of the central government increased by 63.4 percent in the first eight months of FY23, which has been 4.5% of GDP. The recent announcement towards Energy transition with earmarking Rs 35k core for priority capital towards net zero and energy security, is a welcome step. However, there should be at boosting infrastructure investments and incentivize manufacturing to support the Atmanirbhar Bharat campaign while cementing our positing on the global map enabling the country to become a crucial link in the worldwide supply chain.

Renewable: India aims to produce 50% of its energy from renewables by 2030. As per government data, we are already at more than 40% of the defined goal with more than 170 GW of capacity from non-fossil sources, putting us at 4th rank in the world at the close of 2022. The transition toward renewable energy sources presents a significant opportunity for India to add value. The slew of announcements towards Inter-State Transmission System, energy transition, battery energy storage system of 4000 MWH and extending the support to the states for bringing green growth are encouraging and set ambitious goals for supporting Carbon-neutral future which has been one of the priorities in this budget.

Mahesh Palashikar, President, GE South Asia

We welcome India’s Union Budget 2023-24, unveiled today. We applaud the Government for focusing on green growth as one of the top four opportunities for transforming the Nation during Amrit Kaal. Green growth will certainly drive cleaner economy and create large-scale jobs, and be a vital ‘Saptarishi’ priority to achieve net zero by 2070. We are encouraged by the commitment of capital investments of Rs. 35,000 Crores to accelerate energy transition towards net zero. The well-deserved recognition of pumped hydro storage as a robust storage solution and the proposed detailed framework is indeed a pragmatic step forward. As India moves towards round-the-clock cleaner power, a cost-effective storage solution like pumped hydro would be game-changer in providing sustainable, affordable and reliable power access for all citizens.

We are pleased to note the proposed investment for construction of the inter-state transmission system for evacuation and grid integration of renewable energy from Ladakh. The policy interventions in specific fuels like green hydrogen and wind must continue for India to succeed in achieving its long-term decarbonization objectives. This is an exciting time of country’s green industrial and economic transition. We continue to remain committed as strong partners to help the Nation in its journey towards net-zero!

Deepesh Nanda, CEO, GE Gas Power South Asia

The union budget 2023-24 highlights ‘Green Growth’ among the key priorities in the economic agenda and that is a welcome step. There is a clear intent to boost investment in the green energy space with capital outlay of INR 35,000 crore for energy transition, target to produce 5 MMT of Green Hydrogen annually by 2030, funding viability for battery storage, and future investment to improve grid transmission for better inter-state RE evacuation. The Government’s Green Credit Program will also lead to a shift in the mind-set towards environment protection. These steps, in the coming years, will create a sustainable energy mix and the required energy infrastructure framework attracting further investments and jobs creation. India’s power consumption logged a double-digit growth on Y-o-Y basis in this financial year, and it’s encouraging to see Government’s focus to reduce carbon-intensity of the economy by promoting use of low-to-zero carbon emitting fuels and hybrid models for power generation.

Shubhranshu Patnaik, Partner, Deloitte India

In the year of India’s Presidency of G20, the budget makes an emphatic statement on India’s leadership on clean energy and climate change diplomacy at the world stage. For the first time ever, we see substantive and comprehensive allocations to several areas of clean energy and environmental sustainability including formalization of the funding for green hydrogen, Rs.35,000 Cr for biofuels led energy transition, VGF for 4000 MWh of battery storage systems, capital support for one of the largest renewable energy evacuation projects in the world in Ladakh, instituting a Green Credit programme, promotion of alternative fertilizers, allocation of compressed biogas plants, natural agriculture and mangrove initiation, etc.

For the first time ever, we see well rounded focus on all critical aspects of climate change and energy transition. While we have done remarkably well on renewable energy capacity addition in the past, the budget addresses new energy areas including green hydrogen, battery storage, biofuels and compressed biogas. It also promotes battery manufacturing through waiver in import of capital goods and machinery for the same and provides insights on the government’s next big focus on reducing emissions in agriculture through promotion of alternative fertilizers and natural farming.

Kush Singh, CEO, Essar Power

The Union Budget 2022-2023 reflects the country’s rapid economic growth whilst projecting a bright future. Honourable FM has based the budget on 7 priorities wherein Green growth has been given a major spotlight which is the current need of the hour for the energy sector. Green hydrogen will emerge as an important instrument to decarbonise the energy value chain, including the corporate sector. The decision to reduce custom duty on lithium ion batteries will promote energy storage to provide round-the-clock renewable power at reduced cost. The amalgamated steps taken will not only help reduce carbon intensity of the economy but will simultaneously help create job opportunities. The ultimate goal is to reduce dependence on fossil fuel inputs and make the country assume technology and market leadership in this sunrise sector. This is a growth oriented budget and the efforts made towards green growth including policies and fund allocations will help us achieve the target of green hydrogen production of 5 mn tonne by 2030.