Can Budget 2024 help clean up the Power Sector

• India's power sector is placing a growing emphasis on green energy sources to meet its increasing energy demands while also reducing its carbon footprint.
• Cost remains a significant obstacle for solar power, thus hindering its competitiveness against conventional sources, despite tariff reductions.
• The green energy initiatives in Budget 2024 are key to India's manufacturing and export competitiveness and reducing the carbon footprint.

Green energy plays a key role in the power sector in India. As of recent data, India's electricity generation includes a substantial contribution from renewable energy sources such as solar, wind, hydro, and biomass. Reports indicate that India has made remarkable progress in expanding its green energy capacity and reducing its reliance on traditional fossil fuels.

The 2023 budget prioritised the expansion of access to energy through various initiatives. These programs include the city gas distribution project, the Ujjwala scheme, and the establishment of the India Gas Exchange. The city gas distribution project extended coverage to 98% of the country's population, while the Ujjwala scheme provided 96 million LPG connections to rural households.

These initiatives have contributed to increasing access to clean energy and facilitating the adoption of renewable electricity and green hydrogen. The establishment of the India Gas Exchange and the successful implementation of the city gas distribution project have contributed to the better infrastructure for clean energy utilisation.

The year-on-year growth rate in the renewable energy sector had dipped in 2022-23, thus signalling a need for strategic budgetary interventions to reignite momentum. But last year, India's solar journey achieved commendable progress, with installed capacity surpassing 73 GW, securing the 5th position globally. India transitioned from a power deficit to a power surplus country, marking a significant achievement in the power sector. Since, then the government has introduced tax incentives and provided aids to attract investors and developers, with a focus on achieving ambitious capacity targets.

Budget 2024 is expected to play an important role in fostering a clean energy ecosystem, such as green hydrogen, solar and wind energy, battery storage, and carbon markets. With the goal of achieving 500 GW of non-fossil energy capacity by 2030 and fuelling 50% of its energy necessities from renewables, Budget 2024 is anticipated to focus on driving significant investment in renewable energy projects. The government could also target policies for green hydrogen, like lowering GST rates on key components such as electrolysers and solar modules, as well as providing temporary import duty exemptions to encourage domestic production and maintain the pace of solar capacity increase. Similarly, elevating subsidies for sectors that are solely for green hydrogen utilisation, such as fertilisers and refineries, also could boost demand for green hydrogen.

Green energy experts have suggested that investment in an extensive green hydrogen transport infrastructure, encompassing clusters and pipelines, could potentially cut transportation costs and boost supply chain efficiency. Extensions of Production-Linked Incentive (PLI) schemes can also provide valuable support to people engaged in wind and energy storage projects.

It's important for the upcoming budget to clarify the eligibility of the lower tax rate for manufacturing, including green hydrogen and hydrogen derivative businesses. Such clarity would offer tax certainty and incentivise long-term investments. Thus, lining up with the government's National Green Hydrogen Mission's target of an annual production capacity of 5 MMT by 2030.

The budget should broaden the taxation of all carbon certificates, including Renewable Energy Certificates (RECs) and Voluntary Emission Reduction (VER) certificates, to provide a more holistic approach to incentivising clean energy initiatives. And the establishment of a domestic carbon market through this year’s budget, could enable efficient trading of carbon credits for domestic organisations. This would in turn result in achieving net-zero emissions by 2070.

The upcoming budget is anticipated to provide a strategic roadmap driving India towards a future marked by innovation in the power sector. Thus, the new budget would facilitate key initiatives and substantial investment in clean energy projects. To help clean the power sector in India.

By incorporating these measures in Budget 2024, India can indeed rise in the power sector. In order to go hand-in-hand with global sustainable energy trends and capitalise on the potential for future opportunities.