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Think Pieces

The GKC Think Pieces section is an interactive platform that brings together experts and authorities on various subjects to provoke thinking as well as discussion with personal opinion and analysis on contemporary issues related to governance.

06 March 2013

Has the renewable energy sector got its due?

Mukul Sharma

The Union Budget 2013-14 was expected to be a watershed in allocating required public resources for the renewable energy sector, especially so as the government has been projecting a “Sustainable and Inclusive Growth” approach in its 12th five year plan document. However, it only reflected the business-as-usual approach of the government as the current budget reflects a mere incremental budgeting over the previous year’s budget. This evaporated the high hopes raised for the sector with ambitious targets, elaborate policy recommendations and budgetary allocation for the sector as illustrated in the 12th plan document.


The proposed budgetary allocation for Ministry of Renewable Energy at Rs 1533 crores in the 2013-14 budget  is an increase of approximately 32 per cent over the last year’s budget allocation. This has been the second highest increase in allocation (in percentage terms) since 2007-2008.


While this is a positive sign of the government’s realisation regarding the growing importance of the sector, it is still debatable if this amount suffices when compared to the Government’s ambitious targets in the 12th five year plan.


Even though the nodal ministry, the Ministry of Renewable Energy, has received the projected Rs.19113 crore in the 12th five year plan, the outlays for the first two annual plans are not accorded with adequate financial resources. Against the total requirements of Rs. 2979 crore for the annual plan 2012-13, the renewable energy received nearly Rs.1163 crore, a shortfall of Rs.1816 crore. Further, the nodal ministry has received Rs. 1533 crore against the annual plan requirements of approximately Rs. 4000 crore in 2013-14. The estimated funds for the next three annual plans are Rs. 38534 crore to be utilized. This skewed allocation across annual plans may affect the capacity of the implementing agencies to utilize resources effectively.


Contrary to the potentiality of the sector, the budgetary investments to realize the potential have always been inadequate. Acknowledging the need for high investments, the Estimates Committee had recommended increasing the budget allocation for renewable energy to 1 per cent of the total union budget allocation (during its thirteenth meeting).


Since the 11th five year plan, the budgets for the renewable energy sector have never touched 1 per cent of the total budgetary spending. The average allocation for the sector for the whole 11th plan period was merely 0.072 per cent, which increased to 0.81 per cent in 2012-13 (revised estimates) and 0.092 per cent in 2013-14 respectively in the 12th plan period.


Even though the finance minister’s budget speech brings more focus to the sector than earlier and has brought on the table some important financial provisions, the budgetary outlays for renewable energy in 2013-14 downplays the high policy premium placed for the sector in the 12th FYP. In spite of forming 12 per cent of the total installed capacity of power plants, renewable energy sector is still considered part of the environment sector and not an important component of India’s power sector or a potential route for bringing rural development.


There are, however, some interesting initiatives. For example, evolving programmes to reuse municipal solid waste (MSW) to generate energy through fiscal instruments such as viability gap funding, repayable grant and low cost capital could support efforts of municipalities and civil bodies to reclaim landfill sites and check environmental pollution.

The government has also proposed to allocate funds from the National Clean Energy Fund (NCEF) to the Indian Renewable Energy Development Agency (IREDA) to facilitate low costs financing to renewable energy projects. The NCEF is a fund created out of a coal cess of Rs. 50 per tonne of coal used and the total fund is supposed to aggregate to 10,000 Crore by 2015. The method for allocation of the NCEF to projects has been an issue since its inception and has been questioned multiple number of times. Promise to redirect a portion of the fund to renewable energy is a welcome move.

The allocation of Rs.800 crore for wind energy through the reintroduction of “Generation-Based Incentive” scheme, initiated in 2011-12 but stopped in the last year may help power producers to restart investments in wind-power projects and it may encourage actual energy generation rather than capacity addition only resulting in optimum utilization of wind resource and additional flow of power to the grid may lead to power stabilization in the long-run.


Yet, the budget seems to have left out some key issues like the transmission and distribution infrastructure of the power sector especially with respect to renewable energy projects (As per the Power Grid Corporation Ltd estimates, for the capacity addition plans for the 12th Plan period, an investment of around Rs. 43000 crore would be required for creating renewable power infrastructure). The issue around the budgetary support for the second phase of the National Solar Mission, inspite of a successful first phase was also not attended to. In general, the previous budget placed much more importance to the implementation of the eight NAPCC missions than this one.

As the country strives to achieve high economic growth of 8 to 9 per cent by 2016-17, meeting energy requirements of the population at affordable prices would pose significant challenge for the economy. Hence there is a need to expand access to clean energy sources both at commercial and non-commercial level and the shift was particularly felt in allocating higher public provisioning and prioritising regulatory issues for the sector. The extent of public investment needed for the significant shift is yet to be realized and what the budget 2013-14 reflects is a piecemeal approach to prioritize the sector and hence can be viewed as a missed opportunity.

(Mukul Sharma is South Asia Regional Director of Climate Parliament, a group of legislators working to raise issues concerning climate change across the world.)