A perfect storm

India is beset with a perfect storm of shocks. The COVID-19 public health emergency has led to an unprecedented, months’ long lockdown of 1.3 billion citizens, which has displaced millions of migrant workers, put the economy under severe stress and stretched administrative capacity. The crisis has also exacerbated a crisis in multilateralism, which had already been ebbing on many fronts. The uncertainty around how long countries and communities would have to remain wary of the coronavirus has made it difficult to restart the economy and put long-term sustainable development at risk.

It is now evident that going beyond immediate relief measures to counter the crisis, India needs a major economic recovery plan to counter the short- to medium-term adversities.

The Government of India has announced a special economic and comprehensive package sized at 10 per cent of GDP, which includes interventions for immediate relief, liquidity, and payment deferrals. These announcements have been made in phases, starting with a relief package of INR 1.70 lakh crore (USD 23 billion) in March 2020 under the Pradhan Mantri Garib Kalyan Yojana (PMGKY) to provide food and cash in hand to the poorest of the poor; interventions by the Reserve Bank of India (RBI) worth INR 6.50 lakh crore (USD 86 billion) — 3.2 per cent of GDP — to support businesses, in particular micro, small and medium enterprises (MSMEs), and the broader, economy-wide interventions declared in May.

In parallel, the government has partially restarted bus and train services to allow migrants to return to their villages, and special flights to repatriate citizens stranded abroad. Some essential industries have been permitted to operate, with restrictions, only employing workers already available in those districts, and housing them within industrial compounds.

In his address to the nation on 12 May, Prime Minister Narendra Modi launched the Aatma Nirbhar Bharat Abhiyan (Self- reliant India Movement), exhorting citizens to be ‘vocal for local’, indicating the strategic shift in focus to a robust domestic production and supply chain, and a cautious outlook towards international trade.

Even as the immediate attention remains on the humanitarian emergency — for health services and relief to patients, stranded workers and vulnerable communities — India has set out to implement a recovery-cum-stimulus strategy.

Faced with the dilemma of containing the outbreak and saving lives, on one hand, and preserving businesses and livelihoods, on the other, the government has devised fiscal and monetary policy responses to cover two planning horizons: Immediate, to address relief measures to cushion the nationwide lockdown; and medium- to long-term, to deal with the socioeconomic aftereffects in terms of public healthcare, priorities for state expenditure, and regulations to operate businesses and establishments.

This road to recovery also critically depends on the exit strategies from the lockdown. Post-lockdown public finance would have to focus on two areas: A fiscal stimulus to alleviate the adverse impact on firms, self-owned enterprises, and migrant workers, and structural economic recovery through stabilisation of financial institutions and inflation rates, and increased rate of economic growth.

A new social contract

The COVID-19 pandemic gives us an opportunity to shape the economic recovery in a manner that would deliver a new social contract between the state, the citizen and the enterprise, one that rests on two pillars: commitment to jobs, growth, and sustainability; and a razor-sharp focus on tail-end risks.

Policymakers usually dismiss the trinity of jobs, growth, and sustainability as ‘impossible’. Often, public policy interventions prioritise two out of these three objectives. Building a new social contract rests on squaring this impossible trinity by reorienting the economic structure from being exclusionary to making sustainable development much more people-centric and inclusive.

India’s economic recovery path from the pandemic has significant trade-offs. As the full spectrum of the crisis unfolds, we must acknowledge two crucial dimensions. First, the past is no guide to the future means that the traditional methodology of deductive assessments based on trend or time series economic analysis is no longer useful, at least in the short run. Cross-sectional comparisons are also hampered by differential experiential trajectories.

The government must, therefore, implement a survey-based rapid data collection and investigation strategy so that policy can be designed based on inductive analysis, learning from the impact of the crisis on different geographies and socioeconomic conditions. This will also help repurpose public and private expenditure as the situation evolves.

The second dimension is the trade-off between economic optimisation and the alleviation of human distress. There are no easy answers to difficult questions:

• Should the effort be to incentivise migrant labour to remain in their workplaces with attractive remuneration packages and a commitment to better working and living conditions (such as commitments to a slum-free India, better quality public education, and healthcare)?
• Or should the government prevent a repeat of the unfolding tragedy by adopting a policy that leads to reduced concentration of workers and dispersion of economic activity to areas of the country from where the migrant labourers hailed?
• Should public resources be used to compensate those whose livelihoods will be substantially destroyed by the epidemic?

These questions may not have direct answers, but the solutions can only emerge with clear, defined objectives (drawn from a growing body of evidence) and the capacity to implement them through the administrative machinery.

Delivering on the promise of jobs, growth and sustainability would rest on some key principles: Informed decision-making (especially when traditional data sources are inadequate); equity in ensuring minimum support to targeted beneficiaries; using new drivers of investment and growth (especially in smaller towns and rural areas); and tapping greenfield opportunities to invest in and develop new areas which would be more resilient against widespread environmental and health shocks. This report is replete with examples and recommendations that fulfill these conditions.

De minimis multilateralism

On the global front, the crisis presents an opportunity to shift international conversations away from dilemmas of common interests and towards issues of common aversions.

Common interests, such as trade, finance and technology, bring countries to the negotiating table. But worries about relative gains and losses to each often result in inertia. Supply chains will shrink as countries seek to reduce overreliance on single sources or markets and aim for more localised value and job creation.

As objectives of countries and companies undergo major shifts, the scope for grand bargains is shrinking. The axioms of free trade, free movement of capital, or freedom of energy supplies are being questioned against a cruder metric: myopic self-interest

For the time being, we must settle for de minimis multilateralism: What is the minimum on which our interests converge?

For new forms of international cooperation to emerge, we must focus on chronic risks that all countries would have an interest in avoiding. When international cooperation is ebbing, renewed drive for collective action can come from how we organise multilateral institutions to respond to shocks, whether health-related, environmental, or financial.

We must now develop the multilateral platforms that can prevent environmental crises of planetary scale and significance.

Help businesses survive, then thrive

Changing global equations will impact India’s industry in both adverse and favourable ways. Sectors primarily dependant on imported raw materials or goods will be endangered if trade barriers rise; however, this presents a massive opportunity for MSMEs to build capacity to deliver world-class goods and services at scale for the local and export markets.

India’s MSME sector represents 90 per cent of its industrial units, and contributed to 45 per cent of its total industrial value addition and almost half its exports—48.1 per cent—worth INR 11.10 lakh crore (USD 147.4 billion), in 2018-19.

However, most of these enterprises are informal and outside the formal trade and banking systems. Of the estimated 63.38 million unincorporated non-agricultural MSMEs, more than 63.05 million i.e. 99 per cent are micro, 0.33 million are small, and approximately 5,000 are medium. Almost 96 per cent of MSMEs are proprietary.

A second complexity is that 90 per cent of India’s estimated 450 million-strong workforce is also informal, with 5-10 million new workers added annually. MSMEs employ about 40 per cent of these workers.

It is impossible to chart India’s recovery without taking these millions of enterprises and their workers along. However, the MSME sector, despite its rapid expansion in the past few years, was already in distress before the COVID-19 lockdown, due to a perceived lack of creditworthiness. While short-term relief measures are imperative to ease working capital constraints, the benefits of indiscriminate lending will be short-lived and only delay the inevitable non-performance of assets.

Sustained revival of MSMEs hinges on addressing the challenge of rampant informality through deep structural and regulatory reforms, starting with proper identification of the enterprises and establishing accountability of all stakeholders

In this report, we propose the creation of a nationwide, centralised digital platform, MISHRII: MSME Information System for Holistic and Real-time Identification, Incentives and Support. MISHRII would collect data on the size, distribution, and economic contribution of MSMEs and their workers to the national output, and seed details such as occupation, days of employment and monthly income into their Aadhaar-linked profiles. It should be linked with the goods and services tax (GST), value added tax (VAT), income tax, and other tax databases, and the banking network for direct benefit transfer (DBT). Access to real-time, credible information about MSMEs would allow their inclusion in formal business and banking systems; ensure efficient, targeted delivery of aid and incentives, and in the long run, allow tracking of compliances, such as goods and services quality, taxation, and environmental standards.

We also recommend the development of a vulnerability assessment framework of MSME sectors; measures to improve the creditworthiness of small businesses, and increasing the capacities of one, the MSME SAMADHAAN Delayed Payment Monitoring System to expeditiously clear government dues to micro and small enterprises, and two, the National Company Law Tribunal to efficiently manage insolvency cases.

Further, we believe that India must take appropriate protection measures against predatory practices of some trading partners to undercut product prices and route low-cost exports through the ASEAN countries under the cover of free trade agreements (FTAs). Such safeguards will prevent a collapse of our domestic industries, especially strategic ones such as ferrous and non-ferrous metals, textiles, pharmaceuticals, solar cells and modules, and heavy machinery.

Secure resources and build resilience
against tail-end risks

The international environment is beset with traditional security concerns. But the biggest threats are no longer states, nor non-state terrorist groups. The gravest concerns are about tail-end risks, which have low probability but can be catastrophic.

The COVID-19 crisis has amply demonstrated that India needs to invest in resilient infrastructure and governance systems to respond to low-probability but high-impact tail-end risks, which can have catastrophic consequences and choke the economy, imposing far greater costs than the investment needed to increase resilience.

In many sectors, regulations consider worst-case scenarios, such as, structural integrity of buildings in earthquakes, or capital reserves for insurance firms. On the battlefield, military strategists imagine the worst and prepare accordingly. Public health pandemics, food shocks, water scarcity, electricity grid collapse, or climate change-induced extreme events demand similar approaches.

We recommend that the government launches an Environment and Health De-Risking Mission to focus on risks posed by climate change, air pollution, chemicals, and antimicrobial resistance. For this, India must develop a Climate Risk Atlas covering critical vulnerabilities (coasts, urban heat stress, water stress, crop loss, vector-borne disease, and biodiversity collapse). De-risking strategies must be drawn up at the national level and, to begin with, for five most vulnerable states.

Involving insurance companies in this process would help to secure investments in urban and coastal infrastructure once there is recourse against extreme events.

Increase food, water, energy security

The lockdown has disrupted supply chains of agriculture and horticulture produce, crashed farm-gate prices of fruits and vegetables, and led to closure of markets, causing farmers to lose thousands of crore worth of produce due to lack of retail offtake and storage facilities. The stoppage of supply networks has also deprived a significant proportion of urban poor, especially informal workers and daily wage labourers, of access to safe, affordable and nutritious food.

While the government has stepped in with urgent relief for 800 million poor people by doubling their usual monthly entitlements under the Pradhan Mantri Garib Kalyan Ann Yojana (PMGKAY) to free 5 kg of wheat or rice and 1 kg of preferred pulses, and provided various other income support through DBT, it is imperative for India to systematically enhance food security of citizens.

Learning from the COVID-19 crisis, we recommend large-scale deployment of state-supported canteens to provide hygienic, affordable and nutritious cooked food thrice a day to all urban migrant workers (approximately 30 million). This would require capital infusion of about INR 26,500 crore (USD 3.5 billion) for an estimated 60,000 canteens and 8,200 kitchens . We estimate the price per meal to be about INR 15 (USD 20 cents), which could cover operating expenses.

Each canteen serving meals to 500 beneficiaries could employ 20 people on average, generating 1.2 million jobs to serve the 30 million migrant workers. This will also initiate demand for diversification of food production through assured procurement.

In parallel, the government should work with the National Bank for Agriculture and Rural Development (NABARD) to provide preferential ‘post-harvest management’ loans to farmers and Farmer Producer Organisations (FPOs) to procure low cost, energy-efficient, and preferably, renewable energy-powered technologies such as solar dryers, cold storages and agro-processing units. This will prevent wastage of produce and create jobs for small scale equipment manufacturers and post-harvest workers.

Equally important is securing India’s water sources, which are in severe distress from decades of apathetic governance, inadequate budgetary allocations, archaic processes and technologies, and institutional mismanagement. The COVID-19 crisis has underscored the scarcity of clean water in the country, with millions of people having no recourse to even wash their hands.

It is crucial that we reassess our water systems and reprioritise water governance. This is a vast and emergent area, and in this report, we have noted indicative recommendations to improve irrigation efficiency (especially for small and marginal farmers), fast-track wastewater management, ensure piped water supply, sanitation and sewerage connection to households, and initiate data-driven water management for river basins.

India imports nearly 84 per cent of its oil, a rising share despite efforts to reduce oil import dependence to 67 per cent by 2022. Supply is threatened by shifting energy geopolitics, and reliability is affected by frequent change in suppliers, which results in a lack of affordable and predictable energy supply and prices

India’s energy security depends on the availability of adequate quantities of critical resources at affordable and predictable prices, with minimum risk of supply distortions to power industries and transportation, while ensuring sustainability for the environment and future generations. For the individual citizen, energy security means access to safe, reliable and affordable energy.

Our understanding of secure storage must evolve beyond vast underground caverns. Evolution of battery technologies will influence options, by speeding up electrification of MSMEs, which cite poor electricity quality as a top concern, and impacting the share of renewables in the electricity mix, increasing prevalence of distributed electricity, and adding to the resilience of grid-based systems. Towards this end, India must also develop a circular economy and strategic reserves for critical minerals, such as those likely to be used in energy storage applications.

Disaster-proof urban infrastructure

The pandemic is one tail-end risk; others include severe climate shocks. With growing environmental and health stress, such calamitous events are likely to occur more often and overlap with one another, overwhelming our capacity to respond.

A heating planet will put infrastructure investments at risk. Temperature extremes could damage the integrity of road surfaces and adversely affect water levels in reservoirs, heavy rains would inundate low-lying areas and damage sewerage infrastructure, and extreme climate events could destroy physical infrastructure.

The United Nations Office for Disaster Risk Reduction estimates that in the past two decades, India has suffered losses of INR 5.61 lakh crore (USD 79.5 billion) and INR 7.53 lakh crore (USD 100 billion) respectively due to extreme climate events and vector-borne diseases. This is excluding the COVID-19 crisis, which has exposed the fragility of India’s emergency preparedness and response systems, and the vulnerability of lives and livelihoods to a range of risks ensuing from a single crisis.

Disaster and emergency management requires strong governance frameworks and high community preparedness to methodically institute resilience and adaptation. This is critical to minimise damage to lives, livelihoods, infrastructure, and the economy, and facilitate quick recovery.

India must evolve its emergency preparedness by building resilient physical and digital infrastructure, training relief personnel, and inculcating social and behavioural changes in citizens.

Investing in disaster resilient urban infrastructure would boost the economy and create jobs, but it is up to 30 per cent more expensive. Meeting these costs requires new financial solutions such as resilience bonds, or factoring in lower insurance premiums in future for infrastructure that has been designed to withstand more severe climate risks.

We recommend a nationwide, centralised and real-time Integrated Emergency Surveillance System (IESM) to facilitate a systematic and sustained response to emergencies and rapid restoration of business-as-usual operations. A Unified Emergency Response Framework (URF), comprising a set of standard operating procedures (SOPs) for the public, should be mandated in school and university curricula, as well as community, corporate, and institutional training, to create an understanding of risks and inculcate behavioural adaptation to stress situations in citizens and communities.

Developing the Climate Risk Atlas, the IESM and the URF involve nominal costs, in the range of INR 5 crore (USD 0.66 million), with basic operation and maintenance expenses. The United Nations Inter-Agency Standing Committee’s (UN-IASC) report on Return on Investment in Emergency Preparedness states that every INR 75.35 (USD 1) invested for preparedness saves over INR 150.7 (USD 2) in future response. Extrapolating this ratio to India’s losses of INR 13.52 lakh crore (USD 179.5 billion) on disaster management in the past twenty years, the government could have saved close to INR 6.76 lakh crore (USD 89.7 billion) if such systems were in place. Such savings could then be directed to productive economic activities.

Public-private partnership (PPP) models should be used to improve urban systems to double as emergency infrastructure. For example, a well-oiled public transport system of buses and micro-buses would provide safe, clean and affordable mobility options for all citizens on usual days; during emergencies, these buses could be repurposed to deliver essential services and evacuate citizens.

Greening the economy: energy, infrastructure, and quality of life

The COVID-19 pandemic has compromised India’s efforts to decarbonise its electricity sector, industries, transportation networks, and the aim to build sustainable cities and towns.

India’s energy and infrastructure sectors have seen tremendous transformation over the past decade in terms of policy reforms, investment generation, on-ground deployment, and adoption of new technologies, digital interventions, sustainable materials, and resource-efficient processes.

In the past decade, 350 million Indians have got access to electricity. But more localised solutions are needed (via off-grid systems) for about 35 million last mile customers. Further, about 700 million got access to a liquefied petroleum gas (LPG) cylinder, but only a third of the rural population, in six most energy-deprived states, uses LPG as their primary cooking fuel.

Though the lockdown has put a temporary halt on major projects, the government has stepped up efforts to resume businesses by defining appropriate health and safety standards for the workforce and mandating strict on-ground enforcement.

In the middle of an economic crisis, however, environmental standards risk getting diluted or clean tech industries can shift down the list of priorities. How can we sustain sustainability in the aftermath of a pandemic-fuelled recession? To maintain – and increase – fuel supply to consumers while minimising import bills and the burden on the exchequer, and staying on the course of sustainable development, the government is exploring new sources of energy, increasing efficient fuel use, and relooking at mechanisms and beneficiaries of various subsidies.

The problem with shifting from a brown to a green economy is that the time horizons for transition vary for different constituencies. The pace at which renewable energy projects can be set up is much faster than it takes to shut down polluting thermal power plants.

Moreover, disruptions are unequally distributed. Utility-scale renewables already employ 99,000 people, and current targets of 100 GW solar and 60 GW wind capacity are likely to generate about 1.3 million direct jobs on a Full-Time Equivalent (FTE) basis¹ (which amounts to a workforce of 330,000 people). In March 2020, Coal India had a manpower of 272445 persons (average annual manpower for 2019 was 292,118)^2,3. But the geographical and skill distribution of these two energy-related workforces varies — and are not easily substitutable.

The demand-supply imbalance in the global petroleum sector has created a supply glut which could persist for two years. The International Energy Agency (IEA) has predicted a 5 per cent plunge in global natural gas demand amid the COVID-19 pandemic, leading to a 10-year low price for spot liquefied natural gas (LNG) Asian markets. The Indian gas system can only take limited advantage of these low prices as current demand is met by domestic production and long-term LNG contracts.

Shift to gas

Still, these prices offer interesting opportunities. India could accelerate its shift to cleaner fossil fuels by revising the natural gas utilisation policy to include polluting industries as priority sectors, which would be more cost-effective than enforcing pollution standards across thousands of businesses. The government should also expedite the city gas grid expansion via single window clearance to facilitate the process to lay pipelines, and prompt consumers to switch from LPG to piped natural gas (PNG) with incentives such as installation cost waivers.

The city gas distribution (CGD) network could create approximately 50,000 direct and indirect jobs by 2025⁴. The switch from LPG to PNG in a shorter 5-year timeframe will reduce household emissions by 1,363 million tonnes of carbon dioxide equivalent (MTCO₂-eq) over the next ten years⁵.

The measures would spur investments by industries that are keen to switch to natural gas but need assurance of long-term stable prices and reliable supplies. These would also move India closer to its target of 15 per cent share of natural gas in the primary energy mix by 2030.

Similarly, India could take the advantage of the differential in procurement and sale prices of petrol and diesel to extend targeted subsidies, for example by providing Pradhan Mantri Ujjwala Yojana (PMUY) consumers extra LPG refills, which would increase their disposable income in these stressed times, and prevent a slide back to traditional biomass-based fuels.

As part of the COVID-19 relief package, the government has announced three free LPG refills for PMUY beneficiaries until 31 March 2021. India could turn the low crude prices into LPG subsidy savings and provide up to six LPG refills to PMUY households in FY2021. The extra free refills may need additional subsidy of around INR 6,000 crore (USD 796 million) — one-sixth of the current subsidy budget — which is already committed under PMGKY. This proposal allows savings between INR 5,500 crore (USD 730 million) and INR 25,000 crore (USD 3.3 billion), accounting for the extra margin of OMCs for refills where the cost of a refill is lower than its estimated market price.

India spends an astounding INR 2.89 lakh crore (approximately USD 38 billion) a year to subsidise energy and energy products consumption.^{6, 7, 8} This includes subsidies and cross-subsidies for electricity, natural gas for the North Eastern states, LPG, kerosene and fertilisers. While this benefits many households, farmers and informal enterprises, poor assessment of economic status — wealth, income, financial solvency of the beneficiaries — have made subsidies universal and inequitable. This is a large leakage of precious public resources, and has driven inefficiencies into the systems that deliver energy and energy products.

Reform electricity subsidies

In the electricity system, distortions caused by inefficient subsidies have resulted in sustained losses for discoms. The package of INR 90,000 crore (USD 11.94 billion) announced by the government as part of the COVID-19 relief package to help discoms pay generators is an outcome of this distortion and comes despite the significant subsidy that is already provided to keep prices low.

Clearly, a more lasting solution is needed, that signals the right prices to the consumers, triggers end-use efficiency, and addresses the needs of the vulnerable (households and farmers) and those that need strategic support (industries). Unconditional income transfer might spur the consumption of demerit goods. To avoid this, we recommend retaining the current model of conditional transfers for LPG, with differential levels of support for varying wealth / income levels, till an alternative economic use case is made for conventional fuels.

For electricity, a direct income transfer could be made to households to support all or a portion of nominal consumption levels (commensurate to the needs of various climatic zones, housing conditions and wealth status). Support for electricity for farm use and fertilisers must be linked to farmers’ household status and landholding size.

The industrial sector is likely to get a fillip from the steep drop of approximately 20-35 per cent in electricity tariffs — and become more competitive. Commercial activity and service sector offerings could benefit from tariff reduction in the range of 30-50 per cent across the states. Growth opportunities also exist in the measurement technologies in electricity⁹.

Coal-based sources account for 70 per cent of India’s power generation; 20 per cent of this comes from thermal power plants older than 25 years and constitutes a significant fixed cost burden for the discoms. The only reason these plants are in operation is the low-cost coal allocation and the resultant low power tariffs offered to the discoms.

This has major implications on air quality as well. An estimated 76,000 premature deaths occur annually due to coal power plant emissions¹⁰. Retrofitting these older plants with pollution control technologies (PCT) will cost around INR 14,260 crore (USD 1.89 billion), which would ultimately be passed on to the consumers.¹¹

It is economically prudent to reduce fixed costs of older plants, bring in financial solvency for the many new, disused plants, and free up low-cost coal for efficient generators. We estimate savings in the range of INR 12,000 to 18,000 crore (USD 1.6 to 2.4 billion) through this decommissioning, which will accrue to the system and can be shared among participating discoms. Addressing inefficiencies in older assets will also improve air quality, competitiveness of renewables, and the overall financial health of the power sector.

Create robust markets for renewables

In recent years, India has seen drastic changes in the way we generate, transmit, distribute and consume power. Electricity, a concurrent subject in the Constitution of India, requires active participation of many stakeholders from the union and state governments, which makes policymaking, regulation and implementation extremely difficult to coordinate.

Already reeling from shaky balance sheets, the renewable energy industry has taken another big hit from the lockdown and requires urgent support to stay on course to achieve the target of 175 GW installed capacity by 2022. We recommend that the Ministry of New and Renewable Energy (MNRE) set up a multi-stakeholder task force to deal with COVID-19-specific sectoral issues such as late payments, curtailment, multi-authority coordination, and logistical problems, as well as force majeure-related costs for each under-construction project.

We must also address political economy roadblocks to scaling up renewable energy. Projects are besieged by centre-state conflicts due to non-alignment of priorities, and states making retrospective changes in policies or threatening to renege on PPAs and/or curtailing off-take.

The need for power sector reforms was well realised; but the changed scenarios due to the pandemic requires fast-tracking of reforms to address issues such as multiplicity of authorities, centre-state policy and implementation conflicts, managing depressed demand, and difficulties in revenue collection.

In this report, we propose a rethink of the structural framework of India’s power sector to address these myriad issues: this includes setting up a multi-stakeholder National Electricity Council (NEC), making an Integrated Energy Resource Plan (IERP), establishing a National Renewable Energy Corporation (NREC), and eventually, notifying a National Renewable Energy Policy (NREP).

CEEW’s preliminary calculations show that a cumulative amount of approximately INR 5,200 crore (USD 690 million) over 2021-28 could facilitate an economically viable market for 28 per cent of generation from onshore wind and solar PV by 2030, creating another 528,000 jobs.

We estimate that the financial outlay will become zero beyond 2028 due to rising competitiveness of renewables and falling grid integration costs. Accelerated renewable energy deployment will save forex from reduced coal imports. Even if half the generated renewable power is used to replace imported coal, India can save over INR 6.75 lakh crore (USD 89 billion) during 2021 – 2030 (nearly ten times the proposed outlay over the same period). It would also abate over 4,650 MtCO2 emissions as compared to business as usual between 2020–30.

This is also a good time to promote domestic solar manufacturing. Our conservative estimate is that solar modules worth INR 15,000 crore (USD 2 billion) would be required annually to meet the domestic demand of 10 GW per year. Meeting the bulk of this demand through domestic production (>50 per cent) can avoid forex outflow of INR 7,500 crore (USD 1 billion). In the long term, domestic manufacturers can tap the international market and supply modules to member countries of the International Solar Alliance (ISA).

Innovations in distributed renewable energy (DRE) can greatly enhance grid reliability through interconnected networks of micro-grid clusters, community solar systems, bioenergy, small hydro, wind and solar hybrids, and ‘behind-the-meter’ battery units and inverters. These micro-grids can disconnect from the main grid and operate autonomously and could mitigate a part of the impact in the unlikely event of a nationwide grid failure.

Building such networks requires concerted policy, regulatory, business, and technological interventions. DRE remains a huge opportunity (only 10 per cent of the targeted 40,000 MW installed so far). In this report, we have included suggestions to promote grid-connected micro-grids for urban and industrial consumers, build new discom-led business models for DRE, create new markets for rooftop solar (RTS), and promote innovation in DRE technologies

We propose that the MNRE sets a target to achieve 20 GW of grid-connected micro-grid capacity by 2025. A CEEW study has found that an urban micro-grid system within the East Delhi area could provide a net benefit of around INR 1.08 per kWh to the discom if designed to optimise for the grid.¹² Small- and large-scale micro-grids of 20 GW can employ around 1,10,000 workers for skilled and unskilled activities.¹³ RTS installations could create about 50,000 skilled and unskilled jobs per 4 GW.

We recommend a Centre for DRE Innovation to promote local entrepreneurship in rural and semi-urban areas through schemes to set up and operate local DRE systems or micro-grids. Interest subsidy and tax deferral for the first five years may be offered to aspiring small businesses, along with options to upskill in DRE technology and business operations. 10 GW of DRE systems installed by local businesses in rural and semi-urban areas by 2025 could generate employment for around 55,000 people.

For rural energy access, we must think beyond infrastructure and connections, and consider affordability, reliability, safety and ease of use. Recent research has identified an INR 3.77 lakh crore (USD 50 billion) market for clean energy solutions for productive uses in the rural economy.¹⁴

RE-powered or energy-efficient solutions, such as solar-powered looms, sewing machines, cold storages, oil expellers, rice and flour mills, and food processors, can transform energy access from a consumption paradigm to an economic driver.

India could also ensure universal rural healthcare through a sustainable energy path: a CEEW study has shown that primary healthcare centres (PHCs) in Chhattisgarh with battery-supported solar PV systems have better outcomes, especially in maternal and neonatal cases, due to power supply for medical equipment and storage of drugs. Such a solution would cost as little as INR 28 per person to deploy and expand clinic-level solarisation of all unelectrified PHCs and sub-centres in the country.¹⁵

We recommend that the government allocate dedicated capital in the national budget of INR 600 crore, a mere 0.6 per cent of India’s 2020-21 energy and healthcare budget, to electrify all sub-centres. This would provide much needed medical facilities in these under-served areas, create thousands of healthcare and allied jobs, and incentivise medical equipment manufacturers to develop more efficient and rugged appliances suitable for rural services.

To catalyse this sort of potential, a new programme — Powering Livelihoods — aims to provide capital and technical support to help scale up enterprises that are deploying such innovations based on distributed energy for income-generating activities. Measures such as these will create jobs, generate significant cost savings from more energy-efficient operations, reduce emissions, and improve the wellness of citizens.

Make cities livable

The lockdown has given citizens in India’s grossly polluted cities and towns a taste of clear blue skies, cleaner air, and a connect with nature, taking them a step closer to a democratic demand for clean air. It has also proved that a significant reduction in emissions can almost immediately improve ambient air quality.

To ensure that India continues to breathe clean air, cities should spend a part of the INR 4,400 crore (USD 584 million) allocated in this year’s Union Budget to strengthen monitoring, augment the capacity of State Pollution Control Boards, and link post-lockdown bailouts and support mechanisms to stated and verifiable actions against air pollution. The government should also carefully assess bringing back industrial activity to pre-lockdown levels in critically polluted areas.

Stringent emission standards for industries, power plants and automobiles could create a large market demand for clean air technologies. For example, the air pollution control equipment market for stationary sources alone is expected to cross INR 780 crore (USD 104 million) by 2022.¹⁶

Another aspect of quality of life and opportunities for additional livelihoods relates to sustainable cooling. There is a strong economic case to boost domestic air conditioner (AC) manufacturing capacity to meet local demand as well as feed into the expanding global heating, ventilation, and air conditioning (HVAC) market. The International Energy Agency (IEA) noted in 2018 that the global stock of ACs in buildings will grow to 5.6 billion by 2050, up from 1.6 billion today – which amounts to 10 new ACs sold every second for the next 30 years.¹⁷

Sustainable cooling is set to be a major growth driver: energy efficient, low-global warming potential (GWP) refrigerants could service an eleven-fold growth expected in residential air conditioning until 2038, or cater to the four-fold growth expected in cold chains, helping lengthen the shelf life of produce, and consequently, farmers’ incomes. The servicing of low-GWP refrigerant AC units alone is expected to see a ten-fold increase in jobs over the next two decades from a base of 0.2 million technicians in 2017 to 2 million. Cohesive development of this sector would provide employment to millions across the value chains, decarbonise the cooling sector, boost exports, and help India meet its climate commitments.

Similarly, we estimate that India’s oil import bill could be reduced by INR 45,210 crore (USD 6 billion) per annum by 2030, and INR 2.86 lakh crore (USD 38 billion) per annum by 2050, if 30 per cent of car sales in India in 2030, and 50 per cent in 2050, are of electric cars.

Sustainability is an economically prudent choice, even when the economy is down. India has set a direction of travel for a transition in the electricity system. We now need consensus on a broader energy transition and must begin a discourse on an economic transition. We need belief not fatalism, the imagination of alternative futures, and action at scale.

We need vision to mediate across different time horizons and institutions to moderate the disruptions. In a slowing economy, we must tap new pockets of growth and invest in resilient infrastructure. Both tracks can boost jobs, growth and sustainability.

Erratum
The PDF of the report launched on 11 June 2020 included the following information on page 22, line 1: “… with an estimated 117 million workers …”. This has been deleted and related citation removed.