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Krishnan Pallassana: This Budget is by far the most promising ever for clean energy in India

Date
11 July 2014
Krishnan Pallassana: This Budget is by far the most promising ever for clean energy in India

Krishnan Pallassana, India Director, The Climate Group, comments on the India Union Budget 2014-15 that was presented yesterday in parliament by the Modi Government's Finance Minister Arun Jaitely, which had a much-welcomed emphasis on boosting India's low carbon economy.

India's Union Budget 2014-15 is by far the most promising ever for low carbon energy in India.

Announcing a host of initiatives and budgetary support, Minister Jaitely in his speech mentioned that "renewable energy deserves a very high priority".

In the Budget, INR 10,000 million (US$171 million) was allocated for the solar power sector, a move that is expected to boost energy generation and progress toward energy security through clean sources.

The government aims to set high-capacity 'mega solar power projects' in radiation-rich states like Tamil Nadu, Rajastan, Gujarat and Jammu and Kashmir, with INR 1,000 million allocated for solar parks on river banks.

Interestingly, INR 4000 million has also been kept aside for solar powered agricultural pumps and water pumping stations. This is welcome news, as initiatives such as adaptation funds for farmers and solar irrigation pumps, signals an integrated approach to combatting climate-related issues.

In a bid to synchronize power generated through renewable energy sources with the conventional power grid, the Green Energy Corridor Project will also be accelerated through new funding.

As a measure to boost the solar manufacturing sector in particular, a slew of tax and duty concessions have been announced which will undoubtedly bring more smiles to the renewable energy business in India. As of now, renewable energy constitutes approximately 15% of India's total power generation capacity of 250 GW.

It's clear this Union Budget spells out Modi’s demonstrated clean energy vision, especially with the renewed focus on solar parks and solar panels atop trains. If seen in totality, there is actually over INR 12,000 million budgetary allocation for the sector, in addition to the solar plants that will soon adorn many 'smart cities' and satellite towns.

And if translated into a timely delivery, this Budget could trigger unprecedented growth in India's renewable energy technology and power generation industry.

But beyond renewables, the Budget also maps out a bold intention to ‘clean up’ conventional coal-based power generation, through a new scheme called ‘Ultra Modern Super Critical Coal Based Thermal Power Technology'.

With this scheme, the modernization of existing power plants and improved efficiency of transmission and distribution - coupled with a renewable energy boost - are further steps in the right direction.

By emphasizing clean energy and boosting investments that will translate into carbon efficient measures, the government seems to have laid the foundation for a low carbon economy in India. Indeed, The Climate Group's assertion that a low carbon model will bring unprecedented growth in India, has been validated by the Finance Minister.

Personally, I think the budget deserves high appreciation. India is a difficult country to govern, with extremely complex political and social compulsions that can often exasperate even hardcore optimists. Modi's government has also inherited a chaotic economy.

Within such limitations, the Budgets spells out the following agenda:

  1. A cautious approach to growth, because rebuilding an economy takes time and drastic measures could be harmful for the country.
  2. Promises are not enough so there is strong impetus on delivery.  Modi has repeatedly said that actually delivering projects is more important than budgetary allocations. National government also needs the well-coordinated support of sub-national governments to translate this vision into action.
  3. Subsidies and social welfare programs will remain and will be slowly rolled back. However, emphasis will go to improving the quality of such initiatives to ensure asset creation.
  4. New tax benefits for the general public and a host of confidence boosting initiatives for business should make everyone happy. More income will translate into more savings and an increased ability to spend.
  5. Seen in conjuction with India's new Rail Budget, there is a clear move toward bringing private sector participation into sectors that were left out of the equation before.
  6. This Budget should be seen as the first step toward consolidation.

On the flip side, many people expected a boost for clean tech research and development in India to optimize the huge technical human resource base. And I would have also expected articulations around a clean and efficient transportation sector - both road and aviation - which is critical to attracting investments. How the government plans to address rapid urbanization and population displacement is another big area of concern.

We are currently digesting the facts and figures presented to explore what this means to The Climate Group’s work in India, but overall India's latest Union Budget signals a prosperous, low carbon future is in store for India

As elucidated by Suresh P Prabhu, The Climate Group's India Chair and Ex-Federal Cabinet Minister of Industry, Energy, Environment and Forests, Chemicals and Fertilizers, Heavy Industry & Public Enterprises, Government of India: "The India Budget 2014 will make the renewable energy sector in India bouyant and vibrant. It clearly reflects the vision of Prime Minister Modi to make the energy sector clean, efficient and viable, creating a roadmap for clean tech investment acceleration. The Modi government has laid the first stepping stone toward a prosperous low carbon economy. I welcome this budget with cheers."

By Krishnan Pallassana. 

Read India's Finance Minister's budget 2014 speech

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