The Union Budget 2024-25 will steer India towards a sustainable path, feel TERI experts

New Delhi, July 23, 2024: The Union Budget 2024-25 presented by Finance Minister Ms Nirmala Sitharaman today included several key initiatives like energy transition pathways, climate finance, improving water resources management, and measures related to irrigation and flood management that will boost India's fight against impacts of climate change, according to experts of The Energy and Resources Institute (TERI).

Calling the Union Budget forward-looking, Dr Vibha Dhawan, Director General, TERI said, “The budget is more substantial in terms of the direction it sets for the next five years than the numbers presented. I am pleased to see that adaptation and mitigation both will be the focus of Green Taxonomy.

“The funding for the agriculture sector is to cover the entire ecosystem, particularly R&D, infrastructure, and supply chain, very crucial for food security in the context of rising climate vulnerability. The continuity of the biofuel agenda and push for renewable energy and green hydrogen are aligned with the long-term priorities of energy security and climate mitigation.

“To top it all, the announcement on preparing a roadmap for moving hard-to-abate sectors— shipping, aviation, iron and steel, and chemicals, including moving from energy efficiency targets to emissions targets—along with preparing a finance sector vision document is a strong indication of steering the economy to a sustainability path. The challenges of the MSMEs are separately addressed. Of course, it would depend on how efficiently these strands are knit together with green agenda and implemented. What can be said with certainty is that the budget indicates a greater emphasis on rapid demonstration, deployment and penetration of green technologies in the years to come. That's the right direction,” she emphasized.

Amb. Manjeev Singh Puri, Distinguished Fellow, TERI, said, “Given our net zero by 2070 goal and the pursuance of non-fossil fuel energy, this budget adds a new and worth pursuing direction, that of small nuclear reactors. India is pushing ahead on the climate challenge.”

Sharing his perspective on the budget, Mr RR Rashmi, Distinguished Fellow, TERI, said, “For energy security in the context of climate change, the budget has emphasized access to stable and affordable energy. It talks of developing an energy transition pathway to meet sustainable development goals. A few specific elements of the proposed pathway as mentioned are the rooftop solar scheme for 1 crore houses, pumped storage, small nuclear energy reactors and support to ultra super critical thermal power plants.

“These initiatives are well known and have been in the works for some time. Their impact on clean energy transition in the medium term is uncertain unless a clearer, larger strategy is available and supported by finance. The budget promises to develop a taxonomy for climate finance so as to enhance availability of green finance. This measure is likely to have an effect only indirectly in the medium term unless it is accompanied by a mandate.

“In the area of solar energy, the budget promises exemption from customs duty to solar capital goods but has significantly refused to provide any exemption from customs duty on solar glass and copper interconnects,” he said.

Breaking down the budget allocation on use of water resources in urban areas, Dr SK Sarkar, Distinguished Fellow, TERI, said, “The budget indicated 9 priority areas — water resources being one of them. Under Urban development priorities, promotion of water supply and sanitation and sewage in 100 urban cities including use of treated sewage for irrigation were included. It is a remarkable initiative as saving water use in the irrigation sector is extremely essential by using treated waste water from the municipal sector.

“Under Infrastructure investment by the central government priority area, irrigation and flood management were included especially in Assam, Himachal Pradesh, Uttarakhand, Sikkim where the effects of global warming and climate change are being noticed in recent times.

“Data and statistics are a weak area in the water sector. Under priority 9, the budget indicates using sectoral bases on this subject. This is a good initiative.

“Overall, the budget has taken certain initiatives in improving water resources management , although these should have included other areas as water scarcity is coming in future years and as per NITI Aayog (2019), water demand in various sectors is expected to be twice the water resources supply. This calls for water savings and use of technology for atmospheric water generation. Incentives for these initiatives have not been included in the budget,” he said.

Analyzing the energy security portion and climate finance, Amb. Ajai Malhotra, Distinguished Fellow, TERI, said, “Looking to the future, the budget affirms that a policy document on relevant energy transition pathways will be prepared. This must be expedited if it is to be of use, as also the document on promoting pumped storage projects.

“It is good that the PM Surya Ghar Muft Bijli Yojana to install rooftop solar plants will be boosted, given the tremendous public response to it so far. The indication that nuclear energy will be a very significant part of India’s energy mix, is an important reaffirmation.

“It is also encouraging that the government will provide fiscal support for the use of indigenous technology for setting up Advanced Ultra-Super Critical thermal power plants,” he said.

Dr Arvind Kapur, Distinguished Fellow, said, “In the budget, the Government is now focusing on natural farming to rejuvenate the soils to have sustainable productivity. This is a right initiative to convert one crore farmers to natural farming in two years where research organisation like TERI are providing natural bio solutions in terms of inputs which provide sustainability in productivity and also less chemical residue for the benefit of consumers.”

Dr Asha Ram Sihag, Distinguished Fellow, TERI, emphasized, “The Budget has a welcome announcement on the creation of a policy document of energy transition, which is required to coordinate policy priorities and efforts towards a sustainable energy path in line with national and international commitments.

“The Budget has two interesting proposals on green energy transition, which look beyond the traditional focus on renewable energy. The proposal on promoting R&D and setting up of Small Modular Nuclear Reactors in partnership with private is at the frontiers of global thinking but would require careful handling to address the risks involved as well as necessary regulatory capacity.

“The other proposal on setting up of a commercial 800 MW Advanced Ultra Super Critical thermal (coal) power plant based on technology developed indigenously by the Ministry of Heavy Industry and BHEL with partners will reduce carbon emissions from coal based power by 10 percent but might require viability support. This might enable longer pathway for coal in the face of emerging climate challenge.

Mr Shri Prakash, Distinguished Fellow, TERI, said, ”Beyond the smart cities mission that was launched in 2015, the government has announced new and much needed initiatives such as resolving housing problems, transit-oriented development etc. in big cities through increased budgetary allocations.

“A new initiative that deserves special mention is development of peri-urban areas that have not been given much attention so far. Besides, expanding the scope of PM Awas Yojana that helps the vulnerable and poor urban dwellers to own their own houses, the Budget has rightly initiated action on enabling policies and regulations for efficient and transparent rental housing schemes. These steps are intended to increase the population's access to renting options while simultaneously enhancing the rental housing industry's efficiency and transparency.

“It is heartening to note that infrastructure particularly transport continues to be a priority area for investment. Increased scope and allocation on PM Gramin Sadak Yojana would unleash both economic and social development of remote and backward areas.”

Mr Sanjay Seth, Senior Director, TERI, noted, “Increasing investment in Urban Housing to Rs.10 Lakh Crore under PM AWAS Yojana Urban 2.0 marks a significant leap in tackling the nation's urban housing crisis. The Center's focus on providing housing for 1 Crore urban poor and middle-class families underscores its commitment to inclusive urban development, while broadening housing typology in Indian cities. This may also generate demand for construction materials and revive steel and cement sectors.

“The government's substantial infrastructure allocation of Rs.11.11 Lakh Crore, along with the announcement of 12 new industrial parks and a focus on industrial corridors, is set to boost demand in the freight segment. To meet our NDC targets, green freight options will be essential.

“The full exemption of custom duties on 25 critical minerals such as lithium, copper, cobalt and rare earth elements, etc. would boost the indigenous manufacturing of EV and Battery components. The emphasis on rural land-related actions, which includes assigning a unique Aadhaar for all lands, digitizing terrestrial maps, surveying lands and establishing a land registry, will help improve land management, enhance transparency and streamline land ownership processes.

“Following the bifurcation of Andhra Pradesh, TERI recommended the Government of Andhra Pradesh on incorporating sustainability into the development of their ‘New Capital City Township’. The investments in the new capital city township demonstrate a commitment to sustainable development and TERI will continue its support in this endeavour,” Mr Seth said.

Mr Girish Sethi, Senior Director, TERI, said, “The budget also gives emphasis to promoting energy efficiency in industries. Energy audit of MSMEs in 60 clusters will be facilitated; financial support to help clusters to shift to cleaner energy sources and implementation of measures is a welcome step.”

“The Interim Budget allocated the Ministry of Jal Shakti Rs.98,418 crore for FY 2024-25. As announced, the Budget has prioritised employment and skilling, innovation, next regeneration reform, infrastructure and urban development. The announced support for water and sanitation includes the Centre’s support to States along with multi-lateral agencies for 1) water supply projects, 2) sewage treatment, 3) solid waste management, 4) such services for the top 100 cities, and 5) use of treated water for irrigation and tank filling.

“Overall, the budget allocation in the water sector opens up new avenues for treated water reuse in irrigation, water conservation, and accelerated performance of existing assets. With the boost in use of renewables like solar, the wastewater treatment and waste to wealth segment is expected to witness a paradigm shift and reductions in operational and maintenance expenditures. The focus on reuse of treated water is expected to enable the Cities/ Urban Local Bodies towards better financial stability and long-term sustainability,” she said.

Mr AK Saxena, Senior Director, TERI, noted, “The budget proposals very appropriately place emphasis on nuclear energy and pumped storage. Nuclear energy, being a zero-emission energy, joint ventures between government and the private sector to indigenously develop small modular reactors and develop newer nuclear energy technologies are welcome to meet the growing energy requirements of the country. “Pumped storage, a matured and proven technology with operational experience also being available in the country, can provide longer duration storage for integration of variable renewables, duly addressing the grid management concerns.

Dr JV Sharma, Senior Director, TERI, said, "The announcement of building taxonomy for climate finance that would enhance availability of capital for climate change adaptation and mitigation."

“PM Surya Ghar Muft Bijli Yojana will be a win-win proposition for the consumers as well as the electricity distribution companies.”

Dr Suneel Pandey, Director, TERI, welcomed the announcement of the Critical Mineral Mission. “This is a good step given our road map for energy transition which will be depending on renewable sources of energy (wind, solar and EVs) which require use of critical minerals such as lithium, cobalt and rare earths. These are used in storage batteries, magnets, electric motors and generators. As in the future, we anticipate huge amounts of waste from transition energy technologies, the waste streams also provide an opportunity to harvest critical minerals from them,” Dr Pandey said.

On central government working with state governments and multilateral organizations to mobilise funding for strengthening water supply, sanitation and solid waste management in 100 large cities and promoting reuse of treated sewage water, he said, “The cities require continued focus on improving water supply, sanitation and solid waste management and it is critical to look at optimizing water supply to avoid water shortage in peak summer season. This has to be done by better demand management, graded water use and reusing treated sewage for non-potable water use. It is also required to ensure maximum resource recovery from waste to create zero-waste societies and decouple waste generation from economic growth.“

Dr Nupur Bahadur, Associate Director, TERI, felt the budget would open new avenues for treated water reuse. “The convergence of the announced Budget 2024 in coherence to its Interim announced in February 2024 has encapsulated focus on poor, women, youth, MSME and farmers.

Dr Shailly Kedia, Senior Fellow, TERI said, "The government has continued to expand the mandate for green growth through the union budget. Some highlights include transitioning from ‘Perform, Achieve and Trade’ to ‘Indian Carbon Market’ mode and developing taxonomy for climate finance. Key measures to support energy transitions include fully exempting custom duties on 25 critical minerals to boost renewable energy and push for solar energy.

“The overall expenditure in the Union Budget increased by 7% while the budget of the Ministry of Environment, Forests and Climate Change (MoEFCC) increased by 3%. The budget allocated for MoEFCC expenditure is only 0.7% which indicates that much of environment related implementation lies with line ministries for which the government can implement green or environment budgeting. This can ensure that budget exercises are used as planning and self-assessment tools for factoring the environment.

“The recently released SDG Index by NITI Aayog shows that India's overall score increased from 57 in 2018 to 60 in 2019-20, 66 in 2020-21 to 71 in 2023-24. With about 6 years to go, India's SDG index score needs to increase by 29 points and further acceleration is needed. Outcome Budgets can be used as a tool to track and inform SDGs actions. The SDG Index of NITI Aayog and outcome budget can be synergized with each other."

Dr Manish Kumar Shrivastava, Associate Director, TERI, opined, “There are some important announcements in the budget on the ecosystem of financing for MSMEs. Encouraging the in-house capacity development of banks to assess the credit eligibility of MSMEs, expanding SIDBI branches, and reducing the limit for converting trade receipts to cash are much-needed interventions. We hope that when all of this is detailed, it puts penetration of green technologies, an effective reduction in the cost of capital, ease of access to finance, and adequate backing with financial commitment at the center.”

“The announcement on green taxonomy including adaptation can be critical for financial flows for low-carbon climate resilient development. It should be at the foundation of the proposed finance sector vision document.”

Mr Souvik Bhattacharjya, Associate Director, underscored, “India’s energy transition ambition will require dedicated supply of many critical minerals. While India has few resources geologically available till date, we are import dependent on many. The announcement of the Critical Mineral Mission with specific emphasis on mining asset acquisition and material efficiency through recovery and recycling will provide impetus to India’s clean energy goals while strengthening self-sufficiency. This will facilitate effective implementation of extended producer responsibilities (EPR) targets as outlined under the battery waste management and handling rules 2022, etc.

“The budget witnessed an announcement of complete exemption of BCD on 25 critical minerals, including cobalt, lithium, and copper. It is pertinent to note that these minerals are crucial in the manufacturing of batteries used in consumer electronics devices, electric vehicles (EVs), drones, and more.

“Given the environmental challenges posed by growing plastic consumption in the country, increasing the BCD for PVC flex banners from 10 percent to 25 percent is a welcome move.”