[Commentary] Smart implementation of budget funds could support green, sustainable recovery

  • The Indian government in February 2021 presented its annual budget which was predominantly a recovery budget focused on bolstering the economy that took a beating due to health and economic challenges caused by Covid-19 in 2020.
  • The 2021-2022 budget with its various packages and schemes have the potential to take on a green pathway that will help the nation build back better, stronger and more resilient against future diseases, climate change and natural calamities.
  • A sector-wise analysis of the allocations show that to achieve such sustainable, climate-positive economic recovery, judicious implementation is key, write Madhu Verma and Aman Srivastava of World Resources Institute in this commentary.
  • The views expressed in this commentary are that of the authors.

The Union Budget 2021-22 announced in February 2021, came amid health and economic challenges caused by Covid-19 and followed stimulus measures totalling a notional value of Rs. 27 trillion (Rs. 27 lakh crore) over the previous year. A sector-wise analysis of the allocations show that to achieve such sustainable recovery, judicious implementation is key.

Predominantly a recovery budget focused on bolstering the economy, its various packages and schemes has the potential to take on a green pathway that will help the nation build back better, stronger and more resilient against future diseases, climate change and natural calamities.

Before the budget, the government proposed a green tax on older commercial and private vehicles, exempting hybrids, CNG and electric vehicles (EVs). The budget mentioned a voluntary vehicle scrapping scheme for private and commercial vehicles older than 20 and 15 years, respectively.

Together with the existing FAME-II Scheme that promotes electric and hybrid vehicles, such policies could support a faster transition to the greener EVs, while simultaneously aiding multiple climate benefits including better air quality.

Additional investments of Rs. 1.18 trillion (Rs. 1.18 lakh crore) in transport infrastructure, an allocation of Rs. 180 billion (Rs. 18,000 crore) to augment bus transport, and 1,000 kilometres of new metro projects will boost people’s access to public transport. To maximise sustainability, the future of Indian mobility must be public, clean, efficient, and integrated.

If the proposed bus transport is electrified, it will have a positive impact from a climate perspective, in addition to supporting well-networked, connected, and equitable urban mass-transit.

Support for discoms and focus on clean energy for sustainable recovery

Discoms (power distribution companies), with combined losses of Rs. 496 billion (Rs. 49,600 crore) in 2018-19, were affected further during the lockdown, when subsidised residential electricity demand rose and industrial and commercial demand declined.

The budget announced Rs. 3.5 trillion (Rs. 3.5 lakh crore) scheme over five years to support regional discoms, by upgrading existing and creating new infrastructure like smart metering and developing competitive models to allow consumers more choices of discoms. Such models would make the system more efficient.

Supporting discoms through smart metering infrastructure would aid with the grid integration of renewable energy. It is, however, important to first address discom losses, by drawing lessons from the Ujwal Discom Assurance Yojana (UDAY) scheme and considering the role of power purchase agreements in discom costs.

Also, the newly envisaged National Hydrogen Mission could help decarbonise heavy industry while supporting electric mobility, meeting our energy security needs and reducing India’s carbon footprint.

The infusion of Rs. 10 billion (Rs. 1,000 crore) to the Solar Energy Corporation and Rs. 15 billion (Rs. 1,500 crore) to the Indian Renewable Energy Development Agency (IREDA) would encourage renewable energy production. Being an early adopter of hydrogen energy technology can pay off in the long-term, given its cross-sectoral sustainability.

Renewable power was an important component of India’s latest annual budget. Photo by Jitendra Parihar (Thomson Reuters Foundation)/Flickr.
Renewable power was an important component of India’s latest annual budget. Photo by Jitendra Parihar (Thomson Reuters Foundation)/Flickr.

These are positive signals for India’s pursuit of its target of 450 gigawatts in installed renewable energy capacity by 2030. Under the Aatmanirbhar Bharat mission, the government can boost micro, small, and medium enterprises (MSMEs) that manufacture solar and wind generation components, which will add to India’s sustainable recovery efforts. Therefore, clean energy access can in turn ensure reliable and affordable electricity to MSMEs, particularly through decentralised generation or demand aggregation and thereby reduce costs and ramp up production.

Read more: [Commentary] Is the Budget’s infrastructure push green?

Health: preventive care, sanitation, pollution control

India’s healthcare budget has been one of the lowest among the OECD (Organisation for Economic Co-operation and Development) countries and BRICS (Brazil, India, Russia, China and South Africa).

India has 1.2 million air pollution-related deaths annually. Besides, given that 96 percent of India’s housing challenge is faced by low-income groups, an imminent rise in the urban population will impact people’s access to sanitation and electricity, further aggravating existing vulnerabilities.

The budget addressed this sector through several allocations, including the Aatmanirbhar Swasth Bharat Yojana (Rs. 640 billion over six years), the National Health Mission, Mission Poshan 2.0 for nutrition, the Jal Jeevan Mission Urban (Rs 2.87 trillion over five years) and the Urban Swachh Bharat Mission 2.0 (Rs. 1.41 trillion).

Additionally, Rs. 22 billion (Rs. 2,200 crore), which is half of 2020’s funds, was allocated for reducing air pollution in 42 urban centres, which would be best addressed using a coordinated air-shed governance approach. Expanding health and sanitation facilities can be greatly supported through improved energy access and distributed solar power, and can significantly reduce vulnerabilities to the future effects of climate change.

Agriculture: addressing the value chain

The budget sought to repair and strengthen the agricultural sector through various measures to boost the incomes of farmers, ensure remunerative prices for their produce and improve supply chains of essential food commodities. Among them are the Agriculture Infrastructure and Development Cess (AIDC), an agricultural credit target of Rs. 16 trillion (Rs. 16 lakh crore) to farmers, an increase of 10 percent, integration of 1,000 more mandis with the electronic national market, and making agriculture infrastructure fund available to agricultural produce market committees (APMCs) to augment infrastructure facilities.

A 10 percent rise in rural infrastructure development could further boost the sector. The minimum support price (MSP) allocation, however, needs to be amended based on climate change projections, groundwater resources, and fertiliser use.

India has the potential to cut 18 percent of its annual greenhouse gas emissions from the agriculture and livestock sector. Several agroecological and natural farming approaches can be incorporated to introduce zero-tillage and resilient crops that will reduce excessive and wasteful use of water and contribute to mitigating greenhouse gases. They can also support farmer incomes, prevent indebtedness and improve their ability to adapt to climate change while leading the country towards sustainable recovery.

Read more: With budget focusing on economic recovery, environment goes out of focus

Ecological infrastructure for sustainable recovery

Covid-19 and nature are intricately linked, so should be the recovery. While the budget did not explicitly talk about this connection, it is heartening to see a 43 percent appreciation in the environment ministry’s budget.

This includes several nature-based solutions provisioning through a rise of almost 33 percent budget Rs. 4.14 billion (Rs 414 crore) for integrated development of wildlife habitat as compared to 2020-21. The allocation for National Coastal Mission has almost been doubled to Rs. 2 billion (Rs. 200 crore) in 2021-22; Rs. 40 billion (Rs. 4,000 crore) has been granted for the development of a seaweed park in Tamil Nadu; and a new Deep Ocean Mission has been launched. The National Mission on Green India also saw a raise from RS. 1.95 billion (Rs. 195 crore) to Rs. 2.9 billion (Rs. 290 crore).

The budget includes green and nature-based solutions in its sustainable recovery progression, but such efforts need to be further scaled up for their co-benefits. Going forward, the way these allocations are put to use and how these declarations are affected, will be key.

Dr. Madhu Verma is Chief Economist and Dr. Aman Srivastava is Lead Economist, World Resources Institute India.


Banner image: India’s emphasis on clean public transport continued with a focus on metro trains projects. Photo by Ashwin Kumar/Flickr.

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