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Budget 2023 — Awaiting a deeper policy push into green energy and environment

Budget 2023 — Awaiting a deeper policy push into green energy and environment

Budget 2023 — Awaiting a deeper policy push into green energy and environment
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By Varghese Bose  Jan 25, 2023 12:31:51 PM IST (Updated)

The country has an ambitious plan to add 500 GW of non-fossil fuel capacity by 2030. With announcement of the green hydrogen mission, that target just went up by another 125 GW. As the prime mover and the first lever in low carbon transition, the government must do everything to accelerate renewable energy transition.

Expectations are abound from Budget 2023. For a country that is expectantly awaiting a Budget that will propel it into the future as an economic and green powerhouse, can it this time make a deeper push into the green? That calls for engaging all green transition levers and end-to-end support from their value chains.

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Although the previous Budgets put us firmly on a path to low carbon development, this Budget comes at a time when we are falling behind on our first green goal of installing 175 GW of renewable capacity by 2022. At the end of December 2022, according to the Ministry of New and Renewable Energy,  we are at 120 GW. While this by itself may not be worrisome, we must look at it from other perspectives as well.
We have an ambition to add 500 GW of non-fossil fuel capacity by 2030. With announcement of the green hydrogen mission, that target just went up by another 125 GW. As the prime mover and the first lever in low carbon transition, the government must do everything to accelerate renewable energy transition. Policy push on the demand side and budgetary push on the supply side can make it happen. 
The gap between historical annual capacity additions and required annual capacity addition points to a serious challenge in achieving the ambitious 625 MW target by 2030. We must unleash demand from power distributors and large private consumers. At the distributor level, state renewable purchase obligations (RPOs) must be made sacrosanct and they must be rationalised based on RE potential. Additionally, the reverse auction method of tariff discovery must be abandoned. Open access can be unleashed to add capacity by assigning ‘captive’ designation to RE capacities under long term (10 years and more) PPAs between IPPs and consumers.
On the supply side, while a lot has been done, the government may look at a downward revision of the 40 percent basic customs duty (BCD) on imported solar modules until the modules made in India under the PLI scheme hit the market. Domestic modules are expected to be available at scale only by 2024-end.
Further, scaling up of renewable energy is constrained by the current grid infrastructure, both in terms of evacuation capacity and grid stability. While the government has allocated Rs 12,000 crore for Green Energy Corridor Phase-II to create additional (power) evacuation capacity of 20 GW in the next five years, no lay out has been created for stabilising the grid and making it capable of accommodating 625 GW by 2030. Therefore, in this Budget, we expect allocation for grid expansion as well as financial incentives for utility scale energy storage and storage-integrated renewable projects.
The second lever in the low carbon energy transition is the electrification of the mobility sector. It is obvious that this lever can deliver its full benefits only when renewable energy transition enables electrification of the mobility sector with renewable power. The EV sector will require safe and durable battery technologies and a reliable network of charging infrastructure to become mainstream. The sector gained unexpected momentum in 2022.
Transition in two-wheeler and three-wheeler segments is also underway. For four-wheelers, buses, and other commercial vehicle segments, budgetary support to reduce the total cost of ownership (TCO) can greatly aid the transition. The GOI may consider linking the EV subsidy (currently capped at 1.5 lakh) not only to the battery rating, but also to its origin; India made cells and batteries being eligible for additional subsidies.
A reliable charging infrastructure only can make EV adoption faster across segments. Budgetary support for joint infrastructure development with states and creation of zero emission corridors along national highways can literally take EVs to the highway. The charging infrastructure must be flexible with options for charging and swapping.
Renewable energy transition and the electrification of the mobility sector would aid in transitioning to a low carbon economy. What remains is the hard to abate sectors of the industry. Green hydrogen, the third lever in the low carbon transition, is expected to fill that gap. The GoI has already announced the National Green Hydrogen Mission with an outlay of Rs 19,744 crore. Although details are not available, we hope that the financial support will extend to storage and transport facilities as well. We expect a reasonable allocation under this Mission in the Budget, along with the contours of implementation.
Our union Budgets in the last few years have been consistently green, creating the space for India to be a green superpower. We expect this Budget to keep the momentum alive and make acupuncture-interventions, relieving key pressure points and creating a smooth path for the accelerated and just transition of the energy sector.
 
—The author,Varghese Bose
, is Senior Director (ESG) at law firm Cyril Amarchand Mangaldas. The views expressed are personal.
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