Budget 2020 Makes A Push For Renewables, Clean Air

In a bid to keep up with its global climate commitments, India’s budget proposal for 2020-21 pushes for renewables and clean air but remains vague on climate change-related specifics.

New Delhi/Bengaluru: Finance Minister Nirmala Sitharaman’s budget announcement on February 1, 2020 made a push for solar energy and clean air and signalled the end for old and polluting thermal power plants.

Climate change has changed rainfall patterns in India, affected communities and caused deaths. Air pollution too has been an increasingly visible problem with India home to 15 of the 20 most polluted cities in the world. With increasing domestic and global pressure to act, India’s budget for 2020-21 makes it a frontrunner among countries driving change with a policy-level push.

The environment ministry’s budget is proposed to be increased by nearly 5% to Rs 3,100 crore over the Rs 2,955 crore in the preceding year.

Similarly, allocation to the Ministry of New and Renewable Energy (MNRE) has been proposed to be increased by 10.62% over the previous year.

Push for solar

The budget 2020-21 speech announced the expansion of the government’s Kisan Urja Suraksha Evam Utthaan Mahabhiyan (KUSUM) scheme to enable about 2 million new farmers to install standalone solar pumps. Further, 1.5 million farmers will be provided funds to install solar pumps connected to the electricity grid, to which they could sell surplus energy.

For the year of 2020-21, the KUSUM scheme has been allocated Rs 300 crore for grid-interactive solar and about Rs 700 crore for off-grid projects.

The finance minister said the KUSUM scheme, unveiled in February 2019, removes farmers’ dependence on diesel and kerosene and linked their pump-sets to solar energy. Grid-connected pumps would enable farmers to sell surplus electricity to the grid and make extra income.

In its previous term, the Modi government proposed for an outlay of Rs 34,422 crore ($4.8 billion) for the scheme, which envisages adding nearly 25.75 gigawatt (GW, or 1,000 megawatt) of solar capacity by 2022 by setting up 10 GW grid-connected renewable plants of 500 KW to 2 MW capacity each. The scheme also aims to install 2.75 million off-grid solar water pumps--including solarisation of 1 million existing grid-connected pumps--to support irrigation.

India uses nearly 30 million diesel/electricity powered pumps; if replaced by 3 horsepower (HP) solar pumps, the country could generate 66.80 GW renewable power, as per an August 2018 study by the Institute for Energy Economics and Financial Analysis (IEEFA), a think-tank. This is enough to electrify nearly 700,000 Indian houses for an hour.

Replacing these 30 million pumps with solar pumps is enough to offset coal use of 141 million tonnes--that could run 400-plus power plants for more than two months--and would save the government Rs 22,800 crore every year that it gives out as power subsidy to farmers, the IEEFA study said.

The finance minister also emphasised on enabling farmers to use their fallow/barren lands for installing grid-connected solar pumps. She also announced a proposal to use railway land along the tracks to set up solar grids.

“Benefits of solarising the fallow/barren land will be compounding, provided we have as simple an implementation process as buying a car or a two-wheeler,” said Prateek Aggarwal, programme associate, Council on Energy, Environment and Water (CEEW), a think-tank. Ecologists, however, cautioned that it could affect the flora and fauna that exists even on barren or fallow land.

Due to heavy subsidies, supplying electricity to agricultural consumers is an expensive business for state governments’ power distribution companies--it costs eight states roughly Rs 50,000 crore, according to an analysis by CEEW. This “huge burden on the exchequer” is also a most inefficient use of public money, Aggarwal said, pointing towards the benefits of solarisations of pumps.

However, some experts said KUSUM could lead to over-exploitation of water, examples of which have already emerged in drought-hit regions in Maharashtra.

“The key question to ask is what the design of these solar pumps will be,” Jagdish Krishnaswamy, senior fellow, Suri Sehgal Centre for Biodiversity and Conservation at Ashoka Trust for Research in Ecology and the Environment (ATREE), told IndiaSpend. “If you can pump out as much water as you want then it may lead to overexploitation for groundwater.”

Budget for renewables increased, still 52% lower than the budget for coal

To reduce carbon emissions, India has made a global commitment to move away from coal and get 40% of its electricity from non-fossil sources by 2030, compared to 11% now.

Allocation to the Ministry of New and Renewable Energy (MNRE) has increased by 10.62% in the budget 2020-21 proposal. Although funding to coal is down 2.25%, funding for MNRE is 52% lower than the total allocation to coal.

In the 2020-21 budget, the government allocated Rs 40,350 crore (around $5.6 billion) to coal, while the MNRE got Rs 19,479.74 crore (around $2.7 billion).

The budget for coal ministry includes government investment in public sector enterprises, such as Coal India, NLC India Limited, Singareni Colleries Company Limited and National Thermal Power Corporation. Similarly, MNRE’s budget also includes government’s funding in Indian Renewable Energy Development Agency and Solar Energy Corporation of India.

Such gaps have existed in every single budget since 2009-10, IndiaSpend reported on August 17, 2019.

Budgetary Allocations To Coal & Renewables
Year Ministry of Coal Ministry of New and Renewable Energy
2019-20 41280.05 17608.64
2020-21 40349.61 19479.74

Source: India Budget 2020-21; Figures in Rs crore

The 10.62% increase in the MNRE’s budget, compared to a year before, can be traced to a rise in the funding for centrally-sponsored off-grid projects. For 2020-21, these projects have received an allocation of Rs 1,184 crore, a 72% jump compared to the budget of Rs 688 crore last year.

Ministry of New and Renewable Energy
Budget 2019-20 Revised Budget 2019-20 Budget 2020-21 % Change
17608.64 16358.06 19479.74 10.62
Central-Sponsored Grid-interactive Projects
Green Energy Corridors 500 52.61 300 -40
KUSUM -- -- 300
Solar 2479.9 1789.49 2149.65 -13.32
Wind 920 1026 1299.35 41.23
Bio 25 4.68 75 200
Total grid-interactive RE 4272.15 3089.64 4350 1.82
Central-Sponsored off-grid/Distributed and decentralised
KUSUM -- -- 700
Solar 525 491.02 366.14 -30.26
Wind -- -- 3.01
Bio 50 6.03 53 6
Total off-grid/Distributed and decentralised 688 550.36 1184.2 72.12

Source: India Budget 2020-21

Renewables will also solve the critical health issue of air pollution, responsible for one in eight deaths--1.24 million lives in India--in 2017, as IndiaSpend reported in December 2018.

Old thermal plants to be shut

Old thermal plants that fail to meet high emissions norms would be closed down, the Finance Minister said. “For such power plants, we propose that utilities running them would be advised to close them if their emission is above the pre-set norms. The land so vacated can be put to alternative use,” she said.

Coal power plants are India’s chief air polluters. Despite a five-year extension of deadline, a majority of Indian power plants have not been able to get their toxic emissions down. Instead, they have been lobbying to have the emission norms diluted. Even after missing the deadline to retrofit, many units around Delhi-NCR are still working, IndiaSpend reported here, here and here.

“Even if it is not a strict direction, but [it] shows that the government wants to move away from polluting old coal-based power plants,” said Sunil Dahiya, analyst, Centre for Research on Energy and Clean Air (CREA), on the decision to close down polluting power plants.

Stating that clean air is “a matter of concern” for large cities with population above 1 million, the finance minister said the central government would incentivise states that are formulating and implementing clean-air plans.

Parameters for the incentives would be notified by the environment ministry, and Rs 4,400 crore is proposed to be set aside for these, the minister said.

Experts, however, found this announcement ambiguous.

The mention of Rs 4,400 crore for clean air programmes was confusing, given that the total allocation to the environment ministry is merely Rs 3,100 crore--an increase of just Rs 430 crore from last year--Dahiya said. It is not clear where this money (Rs 4,400 crore) is being parked and who would be responsible to manage and disburse it.

Meanwhile, the Centre’s Ujjwala scheme--to provide subsidised LPG (cooking gas) connections to rural households, in order to mitigate the health risks of indoor air pollution--saw a 59% decline in allocation for 2020-21: Its proposed allocation is Rs 1,118 crore, down from Rs 2,724 crore in the preceding year.

As of July 1, 2019, 73 million households nationwide have been provided a cooking gas connection under the scheme, according to government data.

Beneficiaries under the Ujjwala scheme have only bought 3.4 refills per capita annually, according to government data. For these households to completely switch to cooking gas, at least nine cylinders are required per year, IndiaSpend reported on August 14, 2019.

The allocation for the direct benefit transfer of LPG subsidy, credited to consumers’ bank accounts for each refill, increased by 21% to reach Rs 35,605 crore for 2020-21.

Burning firewood, dung and agricultural residues for cooking and other household uses accounts for 25-30% of exposure to outdoor particulate matter (PM) pollution in the country. Each year, around 480,000 Indians die prematurely due to direct exposure to household air pollution, and another 270,000 succumb to indirect exposure outdoors, IndiaSpend reported on August 14, 2019.

Climate change gets attention

The budget speech made several references to climate change as India continues to reel under its unprecedented impact. While the finance minister did not emphasise a particular action, she said commitments at the international level would be executed in various sectors through the different departments and ministries. At the United Nations in October 2019, Prime Minister Narendra Modi had reiterated that India is committed to protect the environment. In January 2021, the Paris Agreement of 2015 kicks in--it commits countries to do their “best effort” to choose a low carbon path.

“More than [Rs] 100 lakh crore is being invested in the National Infrastructure Pipeline, but we should avoid lock-in to high carbon energy and transport infrastructure and invest in climate-resilient low-carbon infrastructure,” said Ulka Kelkar, director of climate at World Resources Institute, India (WRI).

Public transport for Bengaluru

In a key takeaway for the city of Bengaluru, the government announced a 148-km suburban transport project at a cost of Rs 18,600 crore. Boosting public transport is one of the most effective ways for cities to grow while keeping carbon emissions and air pollution in check.

“Support to Bangalore suburban train project is also a welcome development, especially in light of the recent study showing Bangalore to be the most congested city in the world,” said Kelkar.

(Tripathi and Shetty are reporting fellows with IndiaSpend.)

We welcome feedback. Please write to respond@indiaspend.org. We reserve the right to edit responses for language and grammar.

New Delhi/Bengaluru: Finance Minister Nirmala Sitharaman’s budget announcement on February 1, 2020 made a push for solar energy and clean air and signalled the end for old and polluting thermal power plants.

Climate change has changed rainfall patterns in India, affected communities and caused deaths. Air pollution too has been an increasingly visible problem with India home to 15 of the 20 most polluted cities in the world. With increasing domestic and global pressure to act, India’s budget for 2020-21 makes it a frontrunner among countries driving change with a policy-level push.

The environment ministry’s budget is proposed to be increased by nearly 5% to Rs 3,100 crore over the Rs 2,955 crore in the preceding year.

Similarly, allocation to the Ministry of New and Renewable Energy (MNRE) has been proposed to be increased by 10.62% over the previous year.

Push for solar

The budget 2020-21 speech announced the expansion of the government’s Kisan Urja Suraksha Evam Utthaan Mahabhiyan (KUSUM) scheme to enable about 2 million new farmers to install standalone solar pumps. Further, 1.5 million farmers will be provided funds to install solar pumps connected to the electricity grid, to which they could sell surplus energy.

For the year of 2020-21, the KUSUM scheme has been allocated Rs 300 crore for grid-interactive solar and about Rs 700 crore for off-grid projects.

The finance minister said the KUSUM scheme, unveiled in February 2019, removes farmers’ dependence on diesel and kerosene and linked their pump-sets to solar energy. Grid-connected pumps would enable farmers to sell surplus electricity to the grid and make extra income.

In its previous term, the Modi government proposed for an outlay of Rs 34,422 crore ($4.8 billion) for the scheme, which envisages adding nearly 25.75 gigawatt (GW, or 1,000 megawatt) of solar capacity by 2022 by setting up 10 GW grid-connected renewable plants of 500 KW to 2 MW capacity each. The scheme also aims to install 2.75 million off-grid solar water pumps--including solarisation of 1 million existing grid-connected pumps--to support irrigation.

India uses nearly 30 million diesel/electricity powered pumps; if replaced by 3 horsepower (HP) solar pumps, the country could generate 66.80 GW renewable power, as per an August 2018 study by the Institute for Energy Economics and Financial Analysis (IEEFA), a think-tank. This is enough to electrify nearly 700,000 Indian houses for an hour.

Replacing these 30 million pumps with solar pumps is enough to offset coal use of 141 million tonnes--that could run 400-plus power plants for more than two months--and would save the government Rs 22,800 crore every year that it gives out as power subsidy to farmers, the IEEFA study said.

The finance minister also emphasised on enabling farmers to use their fallow/barren lands for installing grid-connected solar pumps. She also announced a proposal to use railway land along the tracks to set up solar grids.

“Benefits of solarising the fallow/barren land will be compounding, provided we have as simple an implementation process as buying a car or a two-wheeler,” said Prateek Aggarwal, programme associate, Council on Energy, Environment and Water (CEEW), a think-tank. Ecologists, however, cautioned that it could affect the flora and fauna that exists even on barren or fallow land.

Due to heavy subsidies, supplying electricity to agricultural consumers is an expensive business for state governments’ power distribution companies--it costs eight states roughly Rs 50,000 crore, according to an analysis by CEEW. This “huge burden on the exchequer” is also a most inefficient use of public money, Aggarwal said, pointing towards the benefits of solarisations of pumps.

However, some experts said KUSUM could lead to over-exploitation of water, examples of which have already emerged in drought-hit regions in Maharashtra.

“The key question to ask is what the design of these solar pumps will be,” Jagdish Krishnaswamy, senior fellow, Suri Sehgal Centre for Biodiversity and Conservation at Ashoka Trust for Research in Ecology and the Environment (ATREE), told IndiaSpend. “If you can pump out as much water as you want then it may lead to overexploitation for groundwater.”

Budget for renewables increased, still 52% lower than the budget for coal

To reduce carbon emissions, India has made a global commitment to move away from coal and get 40% of its electricity from non-fossil sources by 2030, compared to 11% now.

Allocation to the Ministry of New and Renewable Energy (MNRE) has increased by 10.62% in the budget 2020-21 proposal. Although funding to coal is down 2.25%, funding for MNRE is 52% lower than the total allocation to coal.

In the 2020-21 budget, the government allocated Rs 40,350 crore (around $5.6 billion) to coal, while the MNRE got Rs 19,479.74 crore (around $2.7 billion).

The budget for coal ministry includes government investment in public sector enterprises, such as Coal India, NLC India Limited, Singareni Colleries Company Limited and National Thermal Power Corporation. Similarly, MNRE’s budget also includes government’s funding in Indian Renewable Energy Development Agency and Solar Energy Corporation of India.

Such gaps have existed in every single budget since 2009-10, IndiaSpend reported on August 17, 2019.

Budgetary Allocations To Coal & Renewables
Year Ministry of Coal Ministry of New and Renewable Energy
2019-20 41280.05 17608.64
2020-21 40349.61 19479.74

Source: India Budget 2020-21; Figures in Rs crore

The 10.62% increase in the MNRE’s budget, compared to a year before, can be traced to a rise in the funding for centrally-sponsored off-grid projects. For 2020-21, these projects have received an allocation of Rs 1,184 crore, a 72% jump compared to the budget of Rs 688 crore last year.

Ministry of New and Renewable Energy
Budget 2019-20 Revised Budget 2019-20 Budget 2020-21 % Change
17608.64 16358.06 19479.74 10.62
Central-Sponsored Grid-interactive Projects
Green Energy Corridors 500 52.61 300 -40
KUSUM -- -- 300
Solar 2479.9 1789.49 2149.65 -13.32
Wind 920 1026 1299.35 41.23
Bio 25 4.68 75 200
Total grid-interactive RE 4272.15 3089.64 4350 1.82
Central-Sponsored off-grid/Distributed and decentralised
KUSUM -- -- 700
Solar 525 491.02 366.14 -30.26
Wind -- -- 3.01
Bio 50 6.03 53 6
Total off-grid/Distributed and decentralised 688 550.36 1184.2 72.12

Source: India Budget 2020-21

Renewables will also solve the critical health issue of air pollution, responsible for one in eight deaths--1.24 million lives in India--in 2017, as IndiaSpend reported in December 2018.

Old thermal plants to be shut

Old thermal plants that fail to meet high emissions norms would be closed down, the Finance Minister said. “For such power plants, we propose that utilities running them would be advised to close them if their emission is above the pre-set norms. The land so vacated can be put to alternative use,” she said.

Coal power plants are India’s chief air polluters. Despite a five-year extension of deadline, a majority of Indian power plants have not been able to get their toxic emissions down. Instead, they have been lobbying to have the emission norms diluted. Even after missing the deadline to retrofit, many units around Delhi-NCR are still working, IndiaSpend reported here, here and here.

“Even if it is not a strict direction, but [it] shows that the government wants to move away from polluting old coal-based power plants,” said Sunil Dahiya, analyst, Centre for Research on Energy and Clean Air (CREA), on the decision to close down polluting power plants.

Stating that clean air is “a matter of concern” for large cities with population above 1 million, the finance minister said the central government would incentivise states that are formulating and implementing clean-air plans.

Parameters for the incentives would be notified by the environment ministry, and Rs 4,400 crore is proposed to be set aside for these, the minister said.

Experts, however, found this announcement ambiguous.

The mention of Rs 4,400 crore for clean air programmes was confusing, given that the total allocation to the environment ministry is merely Rs 3,100 crore--an increase of just Rs 430 crore from last year--Dahiya said. It is not clear where this money (Rs 4,400 crore) is being parked and who would be responsible to manage and disburse it.

Meanwhile, the Centre’s Ujjwala scheme--to provide subsidised LPG (cooking gas) connections to rural households, in order to mitigate the health risks of indoor air pollution--saw a 59% decline in allocation for 2020-21: Its proposed allocation is Rs 1,118 crore, down from Rs 2,724 crore in the preceding year.

As of July 1, 2019, 73 million households nationwide have been provided a cooking gas connection under the scheme, according to government data.

Beneficiaries under the Ujjwala scheme have only bought 3.4 refills per capita annually, according to government data. For these households to completely switch to cooking gas, at least nine cylinders are required per year, IndiaSpend reported on August 14, 2019.

The allocation for the direct benefit transfer of LPG subsidy, credited to consumers’ bank accounts for each refill, increased by 21% to reach Rs 35,605 crore for 2020-21.

Burning firewood, dung and agricultural residues for cooking and other household uses accounts for 25-30% of exposure to outdoor particulate matter (PM) pollution in the country. Each year, around 480,000 Indians die prematurely due to direct exposure to household air pollution, and another 270,000 succumb to indirect exposure outdoors, IndiaSpend reported on August 14, 2019.

Climate change gets attention

The budget speech made several references to climate change as India continues to reel under its unprecedented impact. While the finance minister did not emphasise a particular action, she said commitments at the international level would be executed in various sectors through the different departments and ministries. At the United Nations in October 2019, Prime Minister Narendra Modi had reiterated that India is committed to protect the environment. In January 2021, the Paris Agreement of 2015 kicks in--it commits countries to do their “best effort” to choose a low carbon path.

“More than [Rs] 100 lakh crore is being invested in the National Infrastructure Pipeline, but we should avoid lock-in to high carbon energy and transport infrastructure and invest in climate-resilient low-carbon infrastructure,” said Ulka Kelkar, director of climate at World Resources Institute, India (WRI).

Public transport for Bengaluru

In a key takeaway for the city of Bengaluru, the government announced a 148-km suburban transport project at a cost of Rs 18,600 crore. Boosting public transport is one of the most effective ways for cities to grow while keeping carbon emissions and air pollution in check.

“Support to Bangalore suburban train project is also a welcome development, especially in light of the recent study showing Bangalore to be the most congested city in the world,” said Kelkar.

(Tripathi and Shetty are reporting fellows with IndiaSpend.)

We welcome feedback. Please write to respond@indiaspend.org. We reserve the right to edit responses for language and grammar.


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