Budget Reactions: Green growth takes centre stage

In the Union Budget 2023-24, the finance minister complimented the country for making rapid progress towards achieving its net zero target by 2070. The budget focuses on green growth. Key announcements included the National Green Hydrogen Mission, which has been allocated Rs 197 billion with a target of producing 5 mmt annually by 2030, a priority investment fund of Rs 350 billion for net zero goal, viability gap funding (VGF) to support the development of battery energy storage systems (BESSs) with 4,000 MWh capacity, 500 new waste-to-wealth plans under the Govardhan Scheme to encourage a circular economy and a framework for pumped storage projects. The budget also acknowledged that building an interstate transmission system for grid integration of 13 GW of renewable energy from Ladakh would cost Rs 207 billion. Another major announcement was customs duty exemption on import of equipment and capital goods needed to produce lithium-ion cells for electric vehicle, batteries. Power Line provides the budget reactions of industry executives on the renewable energy sector. Excerpts…

Pratik Agarwal

The budget has laid down a promising path for the nation’s green growth, clearly identified as one of the seven pillars, with a sizeable outlay of Rs 350 billion. The fin­an­ce minister has also focused on some of the key issues such as battery energy storage and pumped storage projects to ensure stable and round-the-clock supplies from renewable sources such as solar and wind. Additionally, the reduction in duties for lithium-ion batteries is a step in the right direction. The budget has ushered in a key measure for the financial health of states’ distribution utilities by tying 0.5 per cent of their deficit to power sector reforms. This is an added incentive for the states to re­form distribution companies. How­ever, along with incentives, a disincentive pa­ck­age for the discoms would have pro­ven beneficial. The 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

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 increa­se the outlay for capital investment in the infrastructure sector by 33.4 per cent to Rs 10 trillion. This will result in more em­ployment creation, increased manufacturing capacities, and active participation of the energy sector in nation building. The budget focuses on states and cities to encourage urban planning reforms and make cities more sustainable. We applaud the government’s in­ve­st­ment of Rs 350 billion to achieve energy transition and net zero goals, and we note that green growth is one of the government’s seven priorities.

Anish De

As anticipated, the Union budget continued to promote broad policies aimed at embracing energy transition and gr­een growth. That said, there were a number of areas in which the industry would have expected a more definitive push through new PLI schemes, larger VGF outlays and greater support for the overall innovation and manufacturing eco­system. These measures were few and far between in the Union budget, pointing to the limited fiscal space available.

The budget could have been bolder in its measures to rapidly scale up the clean en­ergy ecosystem. With rapid demand gr­owth, the power sector is operating on very thin, or even negative, operating re­serve margins at times. With the underlying economic growth, the demand is likely to increase further. Inadequate generation and capacity expansion could very quickly lead to energy deficits in the coming years. A spectre of this had shown up last year, primarily on account of coal sh­ortages. While measures have been taken to fix that, the supply situation re­ma­i­ns very tight, and is a cause of worry.

S.N. Goel

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 Rs 350 billion allocation for energy transition and focus on promoting green hydrogen and incentivising environmentally sustainable actions through the green credit programme will accelerate the decarbonisation 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, the IEX will co­ntinue to support the government and in­dustry through new initiatives and technological innovations in the energy market.

Sabyasachi Majumdar

The budget’s focus on green growth re­in­forces the commitment towards ac­hie­ving energy transition in the long run. The announcement of a VGF sche­me for battery en­ergy storage projects and the intenti­on to establish a framework for pumped hydro projects are a positive for the rene­wable energy sector, given the importance of storage for renewable sources, which are intermittent in nature.

How­ever, the details is awaited and the timely implementation of these measures will remain crucial. The proposal to in­vest in transmission lines for large-scale evacuation of green power from Ladakh is likely to support renewable energy capacity ad­dition and grid integration. The Natio­nal Green Hydrogen Mission with a target to produce 5 mmt of green hydrogen is also a positive, although the cost re­ma­ins a key consideration. The increa­sed budgetary allocation (Rs 160 billion, 67 per cent increase over FY 2023) under the reform-linked re­sult-oriented capex sc­heme is likely to enable state discoms to augment their infrastructure and redu­ce operational inefficiencies.

Sunil Mathur

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

Rajiv Mishra

Union Finance Minister Nirmala Sitha­ra­man’s continuation of 50-year interest-free loan to state governments for one more year to spur investment in in­frastructure is encouraging and will certainly serve the purpose of incentivising the states to take complementary policy actions. The increased outlay of Rs 1.3 trillion will allow states to continue working on power distribution reforms and enhance the power infrastructure including the installation of smart me­ters. The government has allotted a hi­gh­er amount of Rs 120.72 billion for the reform-linked power distribution sche­me as against Rs 60 billion spending es­ti­mated for the current 2022-23. This sh­ould help improve the power supply situation and assist discoms in moving to­war­ds a healthier market.

The proposed interstate transmission system for evacuation and grid integration of 13 GW of renewable energy from Ladakh at cost of Rs 207 billion will facilitate the development of large renewable energy projects in the UT, which is endowed with abundant solar and wind potential. Above all, the signalling effect of the finance minister’s announcement of 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.

N. Venu

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. The capital expenditure of the central government increased by 63.4 per cent in the first eight months of FY 2023, which is 4.5 per cent of the GDP. The recent an­nouncement regarding energy transition, which earmarked Rs 350 billion for priority capital towards net zero and energy security, is a welcome step. How­ever, there should be a focus on boosting infrastructure investments and incentivising manufacturing to support the Atmanirbhar Bharat campaign. This will cement our position on the global map, making the country a crucial link in the worldwide supply chain.

Renewable energy: India aims to produce 50 per cent of its energy from re­ne­wables by 2030. As per government data, we are already at more than 40 per cent of the defined goal with more than 170 GW of capacity from non-fossil sources, which places us in the 4th position in the world at the close of 2022. The transition towards renewable energy sources presents a significant opportunity for India to add value. The slew of announceme­nts regarding interstate transmission sy­stems, energy transition, battery energy storage systems of 4,000 MWh and support for the states to promote green gro­w­th are encouraging. They set ambitious goals for supporting a carbon-neutral future, which has been one of the priorities in this budget.

Mahesh Palashikar

We welcome India’s Union Budget 2023-24. 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 a 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 worth Rs 350 billion to accelerate the energy transition towards net zero. The well-deserved recognition of pumped hydro storage as a robust storage solution along with 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 a game changer in providing sustainable, affordable and reliable po­wer access to all citizens.

We are pleased to note the proposed in­vest­ment for the construction of the interstate 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 de­carbonisation objectives. This is an exciting time for the country’s green industrial and economic transition. We remain committed as strong partners to help the country in its journey towards net zero.

Shubhranshu Patnaik

During 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 formalisation of the funding for green hydrogen, Rs 350 billion for biofuels-led energy transition, VGF for 4,000 MWh of battery storage systems, capital support for one of the largest renewable energy evacuation projects in the world in Ladakh, launch of a Green Credit programme, promotion of alternative fertilisers, allocation of compressed biogas plants, natural agriculture and mangrove initiation, etc.

For the first time ever, we see a 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 by waiving the import of capital goods and machinery for the same and provides insights into the government’s next big focus on reducing emissions in agriculture through the promotion of alternative fertilisers and natural farming.

Harsh Shah

The budget today has envisioned a constructive growth story for India’s future. The increased focus on infrastructure investment whether via a 33 per cent hike in the capital investment outlay or continuation of 50-year interest-free long-term bonds for the next fiscal is a conscious effort to build a strong base for future growth. Infrastructure spending whether in roadways, railways, po­wer or traditional infrastructure sectors is likely to have a multiplier effect on India’s growth story. The roadmap to funding via the UIDF or opening av­enues such as municipal bonds are big steps towards funding infrastructure the inclusive way.

We welcome the continuous and dedicated effort on futuristic India at 100, especially the emphasis on promoting green power and its evacuation, development of a detailed framework for pu­mped storage projects or looking to deliver 24×7 power with an ambitious VGF funding for 4,000 MWh worth of BESS projects. This will further promote investment in the energy sector while meeting the sustainable energy goals of the country.

However, we hoped to see clarity in the implementation of the National Mon­e­tisation Pipeline and the National In­fra­­structure Pipeline as envisaged in earlier budgets. While guidelines for mo­netisation have been notified at a broader level, the monetisation process is yet to pick up steam. We further hop­ed that this budget would streamline long-term capital gains taxation of business trusts in line with listed equities since securities transaction tax is alr­eady applicable to business trusts. This would have only helped promulgate business trusts further as an in­ve­stment choice, especially for retail and domestic institutional investors.

Kush Singh

The Union Budget 2023 reflects the country’s rapid economic growth while projecting a bright future. The finance minister has based the budget on seven priorities whe­rein green growth has be­en given a major spotlight. Green hydrogen will em­erge as an important instrument to decarbonise the energy value chain, including the corporate sector. The decision to reduce customs duty on lithium-ion batteries will enable energy storage to provide round-the-clock re­ne­wable power at reduced cost.

The amalgamated steps taken will not only help reduce the 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 mmt by 2030.