Budget 2023-24: Green Growth Gets Much Needed Push

Green growth received the much-needed push from the Union Budget 2023 as it has been covered as one of the seven priorities of the Government of India as part of the last full budget before the next general elections.

The revised nationally determined contribution (NDC) approved by Cabinet in August 2022 called for the required cross sectoral approach for reduction in the environmental footprint through reduced specific energy consumption leading to 45% reduction in the emissions intensity. A slew of measures have been announced for energy intensive sectors such as agriculture, transportation, housing and infrastructure and manufacturing.

Investments earmarked for energy transition or net zero initiatives have been given the largest allocation of Rs 35,000 crore, while the pathbreaking policy initiatives of the hydrogen mission secured Rs 19,700 crore for mobilising production of five million metric tonnes of green hydrogen by 2030. Several of the industries already in this business will be benefiting from the budget announcement.

The deeper targets of Renewable Energy (RE) generation were to be followed up with key decisions on grid augmentation and strengthening requirements, which is necessary to ensure that the transmission systems can be resilient enough to effectively manage larger contribution of RE. The budget made an investment provision of Rs 20,700 crore, including Rs 8,300 crore coming from the central government kitty for establishment of interstate transmission network for 13 GW of RE from Ladakh. This will not only improve the overall power situation in the region which is of geopolitical importance to the country but also fuel the economic growth in the region. Power sector is also going to witness traction in energy storage programme as the central government has agreed to fund the viability gap for 4,000 MWh battery storage programme. There has been additional announcement on pump storage for which a framework is expected to be developed.

Transportation sector is also expected to benefit from the structured vehicle scrap and replacement initiatives along with investments in green fuel and electric mobility. The excise duty exemption on GST paid compressed biogas, which is added to CNG to make it environmentally benign, has been allowed. Additionally, customs duty exemption has been extended on capital goods and machinery required for production of lithium-ion batteries for automotive sector.

While the first sovereign green bonds for 5 and 10-year duration have witnessed success last week with greenium of 5 and 6 basis points, respectively, the budget has further talked about Green Credit Programme under the Environment Protection Act, 1986. The same will be notified for the next financial year through which companies and rural and urban local bodies will be incentivised. This may feed in beautifully across the sectors which are not covered under the present Perform Achieve & Trade (PAT) scheme for reduction in specific energy consumption based on the targets assigned to them. Voluntary initiatives taken by companies can help them secure green credits, which may result in tangible long term business benefits through building eminence or having a pole position among the peers.

The budget is quite holistic and calibrated for economic yet sustainable growth. It is expected that the initiatives taken for green hydrogen production, energy storage and energy transition will reduce import dependance to a larger extent in the next couple of years and will bring the nation a step closer to its Panchamrit goals spelt out at COP 26.

(Inderjeet Singh is a Partner in Deloitte India.)