Union Budget 2023: Outlook for the Renewable Energy Sector

The Union Budget 2023 has given a much-needed boost to the renewable energy sector in India. The Ministry of New and Renewable Energy has received INR 10,222 crore. This is a significant increase from the previous year. The budget has recognized ‘Green Growth’ as one of the seven priorities for India in the run-up to its 100th year of independence in 2047. Climate action and sustainability have been at the forefront of discussions worldwide. The Union Budget 2023 is a major step towards achieving energy transition, net zero objectives, and energy security.

Green Hydrogen

The Green Hydrogen Mission, a major initiative in the renewable energy sector, has been allocated INR 19,700 crores. The move aims to promote the domestic production of electrolyzers. These will generate hydrogen from water.

The Green Hydrogen Mission has set a target of reaching an annual production capacity of 5 MMT (million metric tons) of green hydrogen by 2030. In addition, INR 400 crores will be spent on developing green hydrogen hubs in the country. They will serve as centers for research, manufacturing, and deployment of hydrogen technologies.

The Union Budget 2023 will create a robust ecosystem for the production, storage, and distribution of green hydrogen. The final goal is a reduction in the carbon footprint of various sectors, eg. transport, power, and energy industry. It is also expected to provide a significant impetus to India’s energy security and reduce import dependence.  The move will promote the growth of the domestic renewable energy sector.

Electric Vehicles

The promotion of electric vehicles (EVs) has been a priority for the Indian government in recent years. The Union Budget 2023 has extended customs duty exemption towards machinery used for lithium-ion cells. This move will make EV manufacturing more affordable and attract more investors to the sector.

Yet, the Basic Customs Duty (BCD) for solar modules and cells remains unchanged in the Union Budget 2023. This means that there will be no reduction in the customs duty levied on solar modules and cells. They are important components for the production of solar panels. This is in contrast to the government’s inclination toward the renewable energy sector, where solar power is a key factor in itself.

The decision to maintain the BCD for solar modules and cells may be due to various factors. The move likely stems from the need to protect the domestic solar industry and the cost implications of reducing the BCD. It has been a point of contention among some stakeholders in the renewable energy sector. They argue that reducing the BCD would make solar power more affordable and help India achieve its renewable energy targets.

Solar Power

The Union Budget 2023 has allocated INR 5,331.5 crore for the solar power sector. This is a significant increase compared to the previous year’s budget. The Pradhan Mantri Kisan Urja Suraksha evam Utthaan Mahabhiyan (PM-KUSUM) scheme has received an outlay of INR 1996.46 crore. The scheme proposes to install 17.5 lakh standalone solar agriculture pumps in off-grid areas. It also defines the solarisation of 10 lakh grid-connected agriculture pumps. However, the borrowing cost for large solar projects is 8-12%, while it is 14-15% for rooftop solar projects. Reducing the borrowing cost and turnaround time by lenders would be a much-needed measure toward a green ecosystem.

Wind and Hydro Power

The wind renewable energy sector has received INR 1,245 crore, with hydropower off-grid and on-grid receiving INR 31 crore. The government is taking steps towards round-the-clock renewable energy through an impetus to Battery Energy Storage Systems (BESS). Yet, measures to limit emissions from battery dumping post-usage are needed to strive for carbon neutrality.

Green Credit Program

The government has launched the Green Credit Program to incentivize sustainable actions. The move is a net positive for the renewable energy industry. The Union Budget 2023 incentivizes sustainable actions by companies, individuals, and local bodies. It will gradually lead to the mobilization of extra resources for renewable energy projects.

India has updated its Nationally Determined Contribution (NDC) to fight climate change. It aims to reduce the emissions intensity of its Gross Domestic Product (GDP) by 45% from 2005 levels by the year 2030. It also plans to source about 50% of its energy need from non-fossil fuel-based sources by the same deadline. The government is achieving these objectives by allocating funds to the renewable energy sector in the Union Budget 2023. The renewable installed capacity has grown consistently. The government’s efforts toward sustainability are much needed to ensure a greener future for India.

Also Read:- Budget 2023: Outlook For Automobile Industry in India