Is India’s budget for the financial year 2022/2023 "green" enough?– Summary of planned changes in the renewable energy sector

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last updated on 16 ​May 2022

 

On 1 February 2022, the Indian government announced the annual budget and thus the budget for the financial year 2022/2023. In the budget, several references were made to the ambitious and current climate goals in accordance with COP26 and reforms for the sector were announced. A summary of these reforms is presented in this article.

 

India’s ambitious climate goals announced during COP26 have been acknowledged in the new budget and their compliance encouraged. The Indian government hopes that this will provide a major boost in terms of employment opportunities and sustainability. The budget therefore provides for several short-term and long-term measures to achieve the climate goals.

  • Incentivisation of solar energy: To further incentivise domestic production and achieve the ambitious target of 280 GW of installed solar capacity by 2030, an additional INR 195 billion in funding will be made available for production-related incentives to be granted for the manufacture of high-efficiency modules. In particular, priority will be given to fully integrated production units for the manufacture of items ranging from polysilicon to PV modules.
  • Focus on circular economy: Action plans for ten sectors such as e-waste, end-of-life vehicles, waste oil and toxic and hazardous industrial waste have been finalised. The government now wants to focus on cross-cutting issues such as infrastructure, reverse logistics and integration of the informal sector and develop corresponding regulations and schemes. 
  • Transition to a carbon-neutral economy in particular by strengthening bioenergy and banning the incineration of agricultural waste products.
  • Promotion of measures to increase energy efficiency and save energy by Energy Service Company (ESCO). 
  • Promotion of agroforestry: Necessary legislative amendments to promote agroforestry and private forestry will be introduced. In addition, financial support will be provided to farmers being part of Scheduled Castes and Scheduled Tribes who wish to take up agroforestry.
  • Promotion of green public transport: Greater focus will be placed on the use of green public transport in urban areas, such as electric vehicles and clean tech. Due to the lack of space in urban areas, efforts will be taken to promote the replacement of batteries for electric vehicles. Interoperability standards will also be formulated for this purpose. The private sector will be encouraged to develop sustainable and innovative business models for "Battery or Energy as a Service" to improve efficiency in the electric vehicle ecosystem.
  • Introduction of green bonds – In order to facilitate funding of green infrastructure, the so-called “green bonds” will be issued. Here, the returns on the bonds will flow into public sector projects. So far, there are still many uncertainties regarding the actual introduction of green bonds. Here, one has yet to wait for the regulatory framework to be implemented. 


The planned measures for the renewable energy sector sound very promising, but it remains to be seen how the actual implementation of the measures will pan out and then it will be possible to see specific advantages for the industries. In the private sector, hopes continue to be pinned on tax relief, direct subsidies, exemption from customs duties, interest-free loans and careful design of the legal framework. This is the only way that private companies can practically implement the government's ambitious goals in the long term.

 

Irrespective of this, it can be seen that India's budget policy is clearly changing. In the past years, the government's focus was solely on economic aspects, whereas now there is also a clear focus on sustainability and renewable energies. One can therefore assume that India's budget is becoming somewhat "greener" every year.

 

 

 

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