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Budget 2022: CEEW Unpacks Implications for Energy Transition, Natural Farming and Climate Adaptation

Speaking at India's Union Budget Session for 2022-23, Finance Minister Nirmala Sitharaman highlighted energy transition, climate action and financing of investments as some of the key pillars for Budget 2022.

The Finance Minister announced promotion of natural farming across the Ganga corridor, battery swapping policy and formulation of interoperability services for improving uptake of EVs. Further, she informed that sovereign green bonds would be issued for public sector projects to reduce carbon footprint.

Arunabha Ghosh, CEO, Council on Energy, Environment and Water (CEEW), said:

"When the energy transition and climate action become one of four pillars of the Budget speech, it sends a strong signal of the government's intent to drive economic growth and employment through sunrise sectors focused on sustainability. The Finance Minister declared that the government would promote cleaner technologies such as solar energy, sustainable mobility, and sustainable agriculture. That the government will promote natural farming across the country is very welcome. The enhanced outlay for the PLI scheme to increase local manufacturing of solar cells and modules should encourage investors. A separate policy for EV battery swapping and interoperability and the creation of separate zones for EVs are signs that India is keen to create a domestic market for zero-emission vehicles. Co-firing of biomass pellets in coal power plants would reduce emissions and could curb stubble burning. The budget also reaffirms the government's claim to reduce the carbon intensity of the economy by 2030. The decision to issue sovereign green bonds and use them for public sector infrastructure projects would also help private players tap into a deeper green bond market. Offering climate finance services through GIFT City suggests that India could aspire to become a hub of sustainability financing. Notwithstanding the announcements, the budget falls short of expectations on certain counts. The Government could have reintroduced subsidies on LPG cylinders for the poor and vulnerable sections, introduced measures to promote energy-efficient appliances, and created a fund to insure against climate risks. In addition to green bonds, clean energy developers will also need government-backed credit enhancement schemes. The road to sustainability and competitiveness is going to be paved over many years, so the momentum must be maintained." 

Natural Farming

Abhishek Jain, Fellow and Director - Powering Livelihoods, CEEW, said:

"The support for natural farming, and broadly sustainable agriculture, is a welcome move. While the thrust is going to be around the river Ganga, the government must also focus on the rainfed areas in particular. These areas are home to 50% of Indian farmers and they primarily stand to gain by shifting to natural farming. The government should consider an automatic enrolment of farmers practising Natural Farming into the Pradhan Mantri Fasal Bima Yojana to provide a safety net and encourage more farmers to transition to sustainable agriculture."

Green Bonds

Gagan Sidhu, Director - Centre for Energy Finance (CEEW-CEF), said:

"The budget proposal to issue sovereign green bonds has several benefits, principal among which is signalling the country's seriousness in pursuing climate action. India will now join a select group of countries, primarily European, which have issued such bonds. We can also expect this move to catalyse the development of the domestic corporate green bond market. Green bond issuances by Indian companies in the domestic debt capital markets have considerably lagged overseas issuance so far. If sovereign green bonds price at lower yields versus their non-green counterparts, it will also provide an added signal for the private sector to direct their own capital towards green investments. This important move also ties in with the capital expenditure push – a key feature of this budget – and cuts across two of the four pillars that the Finance Minister highlighted in the budget speech: Energy Transition and Climate Action, and Financing of Investments."

Production-linked Incentive

Rishabh Jain, Programme Lead, CEEW Centre for Energy Finance (CEEW-CEF), said:

"While India has been highly dependent on imports to meet the requirements of solar modules, the announcement of an additional INR 19,500 crores (total 24,000 crores) for high-efficiency solar module manufacturing will encourage many existing and potential manufacturers to set up integrated manufacturing in India. This PLI scheme, along with basic customs duty on solar modules and extension of concessional tax regime (15%) for manufacturing (until March 2024), could be the key catalyst for India to become a global manufacturing and R&D hub for solar modules and associated products. Further, scaling up domestic manufacturing would create new jobs, reduce forex outflow and shield India from global supply chain shocks. India has no experience in polysilicon and wafer manufacturing and limited experience in solar cell manufacturing. To leverage this opportunity, manufacturers would need to invest significantly in upskilling manpower and R&D. Institutes of higher education would also need to align their courses to match the skill requirements of the industry."

Electric Vehicles

Rishabh Jain, Programme Lead, CEEW Centre for Energy Finance (CEEW-CEF), said:

"Limited charging infrastructure has been a key challenge to scale up electric mobility. The announcement on battery swapping and interoperability in the Budget could lead to increased user confidence and encourage many to buy electric vehicles. Following the policy, vehicle manufacturers would need to work collectively and launch models with interoperable batteries across their products. Additionally, the government has included charging stations and battery storage as part of the harmonised list of infrastructure that will facilitate credit availability. Active involvement and training of personnel from local urban bodies, discoms and financial institutions on setting up EV charging infrastructure will be critical. Startups and established players could explore the possibility of ‘Battery/Energy as a Service' business model to scale up their effort of setting up battery swapping or charging infrastructure."

Climate Adaptation

Abinash Mohanty, Programme Lead, Council on Energy, Environment and Water (CEEW), said:

"The union budget 2022 prioritised climate action as one of the four pillars and explicitly acknowledged the threat of climate risks, but it clearly missed on providing a booster shot to climate adaptation and resilience. While a renewed focus on urban planning was one of the key takeaways in the budget, there was no mention of climate-proofing these investments and infrastructure. More than 75 per cent of Indian districts are extreme event hotspots as a result of which India has suffered an annual average loss of USD 87 billion. The proposed blended climate finance is insufficient to climate-proof the enhanced investments in infrastructure and livelihoods. Though the budget strongly encompasses climate mitigation strategies and pushes for ecological farming practices, with only one per cent spending on environmental issues, the budget text is tepid on effective risk financing and renewed budgetary expenditure on climate adaptation. Given the current fiscal scenarios, sub-national governments can plug the adaptation finance gaps by tapping into international climate financing, like green climate funds, and enhance the share of public, private and philanthropic (PPP) funds to make our communities, economic sectors and infrastructures climate-ready. Further, these investments should promote nature-based solutions, such as restoring coral reefs and mangroves, switching to natural farming, protecting traditional water bodies and regenerating forests that can fix the negative externalities of climate change."

Micro, Small and Medium Enterprises

Hemant Mallya, Sr Programme Lead and Shuva Raha, Head - New Initiatives, Council on Energy, Environment and Water (CEEW), said:


We are heartened by the Budget proposal to interlink and enhance the UDYAM, e-Shram, NCS and ASEEM portals into live, organic databases providing G2C, B2C and B2B services.

CEEW's June 2020 report, Jobs, Growth and Sustainability: A New Social Contract for India’s Recovery had noted that sustained revival of India's MSMEs hinges on addressing the rampant informality through deep structural reforms, starting with proper identification and mapping of the enterprises. We had proposed the creation of a national centralised digital platform for MSMEs, cross-linked with Aadhaar, GST and tax systems, and the banking network for DBT.

Access to real-time, credible information about MSMEs would accelerate their inclusion in the formal economic system; enhance their creditworthiness; ensure efficient, targeted delivery of aid and incentives such as CGTMSE and RAMP; allow tracking of quality, tax and environmental compliances; promote skilling and jobs – especially in emerging digital and green sectors, and drive market integration and innovation.