India has placed clean energy at the heart of a 25-year economic plan

Shooting her shot.
Shooting her shot.
Image: REUTERS/Anushree Fadnavis/File Photo
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Indian finance minister Nirmala Sitharaman today (Feb. 1) made clear that clean energy will be at the core of the country’s growth over the next 25 years.

In her fourth and shortest budget speech so far, she presented the annual exercise as a blueprint for the next 25 years, involving various measures enabling the clean-energy transition.

Sitharaman allocated major funds towards renewable energy, energy efficiency, electric mobility, and green bonds. The funds from green bonds will be used on projects that will help reduce the economy’s carbon intensity.

“In order to support domestic manufacturing of solar panels for meeting the target of 280 GW of installed solar capacity by 2030, Rs19,500 crore for production linked incentive (PLI) for high-efficiency modules with priority to fully integrated units will be made in 2022-23,” Sitharaman had said while tabling the union budget for the Narendra Modi government.

Interestingly, her announcements today—in line with the country’s global commitment to tackle climate change—will largely benefit the country’s evolving clean-energy industry, especially the Mukesh Ambani-led Reliance Industries which has gigantic plans for the sector.

Last year, Ambani had announced the conglomerate’s foray into the sector with a massive investment of 75,000 crore rupees ($10 billion). The decision was seen by industry experts as Reliance’s attempt to shift from its traditional oil business to the clean energy one.

India’s union budget focuses on new energy

For the ongoing year, India has set an ambitious target of 175 gigawatts (GW) of renewable power. While experts believe this goal will be missed, today’s announcements signal that the government is in no mood to dilute its focus.

For instance, under its newly-launched Vibrant Village Programme, the centre will provide financial support to set up distributed renewable energy projects in border villages, the minister said. Energy-saving and efficiency will be promoted in commercial buildings, too.

Sitharaman also announced the setting up of four pilot coal-gasification and coal-to-chemical projects.

The budget speech today included a major policy push for the electric vehicle industry. Sitharaman announced a new battery-swapping policy to allow the setting up of charging stations at scale, with private companies encouraged to model the swapping. Under this policy, the government will also provide land resources to companies.

“Considering the constraint space in urban areas for setting up (electric vehicles) charging stations, a battery swapping policy will be brought out and interoperability standards will be formulated,” she said.

Other key highlights of union budget 2022-23

Energy aside, India’s budget of $529.7 billion had infrastructure as a focus area.

Sitharaman shared the government’s plan to spend more on highways and affordable housing to fuel growth as the country’s economy recovers from the pandemic-triggered slump.

The finance minister announced spending up to $2.68 billion on highways, also saying that 400 new trains will be manufactured over the next three years.

In her speech, the minister did not announce any direct tax benefits.