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The five key announcements are: an increase in the PLI scheme outlay for solar manufacturing; a boost to the energy storage ecosystem; creation of climate financing avenues; welcome power sector reforms; and a continued focus on energy access via decentralized clean energy.

India needed a budget that accelerated its journey towards the stated 2030 and 2070 climate goals, and this budget has set the right tone. It focuses strongly on climate change and energy transition.

The five key announcements in this climate-friendly budget which show the strong intent of the Prime Minister Narendra Modi and the Finance Minister Nirmala Sitharaman to move the nation towards clean energy include: an increase in the PLI (production-linked incentive) scheme outlay for solar manufacturing; a boost to the energy storage ecosystem; creation of climate financing avenues; welcome power sector reforms; and a continued focus on energy access via decentralized clean energy.

Now it is up to all stakeholders, namely the renewable sector, government agencies, financial institutions, and investors to come together and build on the momentum this budget has created.

Let’s walk through the above announcements and see how they will impact the sector.

Boost for Solar manufacturing

The most encouraging news for the energy transition in this budget came from the announcement of an additional Rs 19,500 crore for the PLI scheme to boost solar manufacturing. This is over and above the allocation of Rs 4,500 crore in the last budget, bringing the total outlay to Rs 24,000 crore. This will help Aatmanirbhar India to create 60 lakh new jobs during the next three to five years and meet the target of 280 GW of installed solar capacity by 2030.

Further, the revocation of anti-dumping duty on steel will help reduce the cost of modules considerably.

Energizing Storage Ecosystem

The budget aims at boosting the energy storage ecosystem, with the announcement of a battery swapping policy, creation of special zones with a zero fossil-fuel policy, and the development of the charging station ecosystem and, thereby, also expanding the domestic EV space. Moreover, the inclusion of grid-scale energy storage in the infrastructure sector will enable access to finances for this critical sector. This signals a clear move by the Finance Minister to a Net Zero economy, which would require the strong support of energy storage systems.

Climate Financing Gets a Lift

Another welcome move is the announcement of the launch of sovereign green bonds, which is a major step towards creating climate financing avenues. The funds through the sovereign green bonds will be used for projects that help reduce the economy’s carbon intensity. The government also aims to promote funds for blended finance with the government share being up to 20 percent for sunrise opportunities, which include agricultural technology and climate action. This will support climate investments at lower cost.

Getting Bolder on Power Reforms

The fact that States will be allowed a 4 percent fiscal deficit to gross state domestic product ratio of which 50 basis points continues to be reserved for power sector reforms, is a bold move. Along with this, concessional duties for electronic smart meters will enable discoms to fast track their deployment, thereby facilitating smoother revenue collections by discoms. The government also aims to increase overall public sector capital expenditure by around 35 percent and has set aside Rs 1 lakh crore for states to catalyse investments. We expect these proceeds to be used towards unburdening the financially stressed discoms, and also towards grid upgradation, which is key to absorbing large amounts of RE capacity in line with the 2030 goals.

Focus on RE Access

The budget announcements further aim to provide financial support to set up Distributed Renewable Energy projects in northern border villages, under the Vibrant Village Programme. This would help in boosting the clean energy transition in rural India.

The budget with deep shades of green works towards enabling an accelerated energy transition, and is noteworthy for its keen focus on climate action.

The government has created an impressive economic document. Now it is in the hands of the private sector to work with the government towards ensuring the smooth execution of the roadmap that the budget envisions–for all our sakes.

Sumant Sinha is the Chairman and CEO of ReNew Power.

Source: Money Control