08 March 2010

And the colour of the 2010-11 Union Budget is...

By: Kaavya Nag

Pranab Mukherjee's Union Budget of 2010-11 proposes an initial step forward in India's transition to clean energy and lower emissions. In his budget speech he said 'while we must ensure that the principle of 'polluter pays' remains the basic guiding criteria for pollution management, we must also give a positive thrust to development of clean energy'. And so the budget aims to give that thrust to clean energy through a series of initiatives: higher outlays, tax and customs breaks (some continued from 2009-10), and a clean energy fund.

Note however the government target of adding 78,000 MW of power by 2012. For this, and in keeping with Planning Commission recommendations, Pranab Mukherjee announced the government's plan to accord the highest priority to capacity addition in the Power Sector. Plan allocation has been doubled from 2,230 crore last year to 5,130 crore this year. The eventual aim of such capacity addition is to get power to the 500 million Indians who currently have no access to electricity. However, the means to that end are currently through increased production of coal and of supercritical thermal power plants.

After a wait of nearly two years, the pet mission of the National Action Plan on Climate Change (NAPCC) - the Jawharlal Nehru National Solar Mission (NSM) has gotten its first allowance. Accordingly, the outlay of the Ministry of New and Renewable Energy (MNRE)'s has nearly doubled: from 620 crore (USD 135 million) in 2009-10 to 1000 crore (USD  218 million) in 2010-11. Another major proportion of money for the NSM is expected to come from a clean energy cess on coal (both domestic and imported) - at Rs 50 (USD 1) per tonne. This money, will be channeled through the National Clean Energy Fund (NCEF) - designated for funding research and innovative projects in clean energy technologies.

This coal cess is expected to generate 3250 crore in 2010-11. For sure, inflow to the NCEF is bound to increase as coal consumption rises in the country year on year (as it has been over the past few years), and is expected to be able to generate millions for the NCEF.

The second NAPCC pet mission - the yet-to-be-announced National Mission on Enhanced Energy Efficiency (NMEEE) - is second in line. While mission details are not out as yet (but rumoured to be launched on 1 April 2010), money-before-plan seems to be the approach for this mission. Nevertheless, energy conservation gets143.94 crore, and the Bureau of Energy Energy Efficiency (BEE) gets 66.92 crore.

These provisions as well as a boost to the renewable energy sector through a cut on excise duty for electric vehicle parts, wind turbines, LED lights and CFL lights promises growth in these sectors. LED lights, wind turbine components and solar cycle rickshaws get reduction in excise duty. Small hydro, solar and micro power projects in Ladakh (J&K) get 500 crore.

However, there is as yet no concerted strategy for India - one that lays out India's plans for changing its renewable energy mix by (for example) 30 percent by 2020, 40 percent by 2025, and 60 percent by 2050. These is as yet no plan that will help realise India's voluntary commitment to the international community - of 20-25% reduction of emission intensity by 2020.

Business as usual is likely to be the growth trend: with coal continuing to make up a major proportion of the energy mix of the country in the near future.

So despite a partial roll-back of fossil-fuel subsidies and an increase in taxation on motor vehicles, a clean energy fund funded by dirty energy is rather similar to nature conservation grants coming from petroleum and mining companies. Much like the old Hindi saying 'Ek hath se lo, ek hath se do'. (Give something away with one hand and take an equivalent amount back with the other).

Disclaimer: admitted - funds must start somehow and somewhere. For now, what better than levy a charge on coal. Therefore, by no means does one trash the fund itself, nor its intent. One just questions the point of having a source that you eventually, and ideally want to contain.

The colour of the budget is pale green.

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