By Mahua Acharya
India announced very ambitious targets at the recent climate summit in Glasgow. While many of them have been talking about the net-zero target, the much tougher task is what lies ahead in the next few years. Pledging to reduce the emission intensity in a country that has serious growth ahead of it is not easy. Getting to 50% electricity generation from renewables in less than 10 years and getting to 500 GW of non-fossil fuel power in the same period are equally tough. Similarly, India announced aggressive electric vehicle (EV) targets.
The last year has seen a flurry of activities on EV and the building up of an EV ecosystem. As on date, 18 states have announced EV targets and yet there are more in the pipeline. Multiple ministries, institutions, NGOs are working on different aspects of the ecosystem. And then finally, there is this 2070 net-zero goal, for which planning has to be integrated into a whole-of-economy kind of way. Since nobody in the world has a recipe for how to do this kind of planning, while also meeting growth goals, the Budget offers some good pieces that put India on the right path.
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Concepts such as ‘energy transition’, ‘climate action’, and ‘clean and sustainable mobility’ – words that don’t mean as much when spoken outside of their respective industries – have assumed mainstream positioning. This is a welcome acceptance – one that is affected by climate change, increased urbanisation, unpredictable virus attacks, and worsening air quality. In other words, a new normal.
While India has had forward-looking Budgets in the past with aspirational concepts such as ‘smart cities’, this one offers more hope in certain areas. For example, the idea of ‘blending’ has been noted for finance and investment, with clear next steps on topics for funds and a governmental commitment of seeding the first 20%. Battery swapping has a paragraph to itself, with clear next steps around a policy, innovative business models and the idea of ‘battery as a service’. This is sure to go a long way to give comfort to new companies building out solutions. It is also the exactly the kind of certainty that the market needed.
The stress on urban development is both necessary and important. The Budget reconciles that India’s population is moving from rural to urban. This means working deliberately on building out the tier 2 and tier 3 cities–and to that extent, planning for the future through dedicated centres of excellence is good. The specific mention of public transport is excellent. It would be good to see commensurate detail around next steps, especially given that between now and the next Budget, many of our cities will be replacing their buses or buying new ones. This is sure to trigger questions and uncertainties on several aspects of the business – and attracting private sector investment is key. More risk mitigation instruments in this space would have been good.
Specific focus on domestic manufacture and the use of production linked incentives as the carrots for high efficiency solar modules is excellent. Similarly, a bigger envelope for capital expenditure especially in a Covid recovery context was much needed. Explicitly mentioning that public investment must continue to take the lead sends an important message to private investors around the allocation of risks.
And finally, as the country embraces and encourages modern technologies, tests newer business models, its own mechanisms and processes need to keep up.
To that extent, reminding India that government procurement has been modernised underlines a certain consistency in the approach – that public systems have to keep pace with ambition. India has held steady post-Covid and not overstretched the national exchequer. Growth is back, even though from a much lower base.
This Budget makes decisive strides in that direction – and in many ways, directs capital and public sector support towards growth in a new normal.
The writer is CEO, Convergence Energy Services (CES). Views Are personal.
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