<b>Ajay Mathur:</b> The Budget needed to be greener

FM has increased the allocations for the ministry of environment and forests by about 10%

The Union Budget, as expected, focused on rural development, agriculture and allied sectors, with allocations in these areas going up by 24 per cent, compared to the previous Budget. The prospects for India’s agriculture, and about half of the country’s workforce that depends on it, is intrinsically linked to the health of the natural resource base that sustains it. The declining gains in productivity of major cereals are a clear indicator of the need to attend to fundamental issues that are affecting the sustainability of the sector, including the pricing of resources and the extension machinery for agricultural research in the country. We hope that the government will take some bold measures in these directions as well. 

Overall, TERI’s analysis of the green quotient of the Budget suggests that it has done well when it comes to allocations to ministries and programmes that are directly engaged in the management of environment and natural resources and in enhancing access to clean energy. 

Compared to the last Budget, allocations to such ministries and programmes is up by about 6.6 per cent in real terms, which is good news. However, there was need for a stronger statement in the speech on meeting our Nationally Determined Contributions with respect to renewable energy, energy efficiency and carbon sequestration through forests.

The finance minister has increased the allocations for the ministry of environment, forests and climate change by about 10 per cent. While a good signal, this increase is much lower than that between 2015-16 and 2016-17, and hence does not reflect any stepping up of efforts towards the NDCs, which will require a huge commitment of resources. TERI estimates suggest that about Rs 100,000 crore would be required annually for conservation and afforestation measures that are needed to achieve the 2.5-3.0 billion tons of additional carbon sequestration alone.

It is obvious that this large a scale of investments cannot be met from the central Budget alone. However, it does highlight the need for the central government to provide a leadership role in terms of an integrated strategy across ministries and tiers of government for meeting this commitment. It also makes the case for the tactical use of limited central resources to effectively leverage resources from the private sector.  

A case in point is the use of the National Clean Energy Fund (NCEF), which is funded out of a cess levied on produced and imported coal since 2010-11 under the “polluter pays” principle. The monies so collected are meant to be used for the purposes of financing and promoting clean energy initiatives, funding research in the area of clean energy, or for any other purpose relating thereto. The rate of the cess has been progressively increased, from Rs 50 per tonne of coal in June 2010, Rs 100 per tonne (Budget 2014-15), Rs 200 per tonne (2015-16) to Rs 400 per tonne (2016-17).

Of the aggregate amount collected between 2010-11 and 2017-18 (Budget estimates), only about 35 per cent has been transferred to the NCEF, which itself remained underutilised to the extent of 20 per cent. The issue of under-utilisation of the NCEF has also been pointed out by successive reports of the Comptroller and Auditor General of India.  

The ministry-wise break up of aggregate allocations from the NCEF shows that about 70 per cent has been allocated to MNRE (ministry of new and renewable energy). In fact, almost 50 per cent of the MNRE’s budget this year is being met from the NCEF. A look at MNRE projects financed through the NCEF in successive years shows that the funds have been deployed mostly for the installation of individual grid-interactive or off-grid renewable energy projects and pilots (mainly solar) and for extending financial subsidy through commercial banks for the installation of systems.

It is essential that the NCEF be more efficiently and strategically employed as an enabler of large-scale change in the sector through its greater use for viability gap and seed funding that can improve the competitiveness of the industry in the long run. Another area where the fund should be deployed is applied research and development of viable technologies and business models for clean energy services in India. Unfortunately, NCEF allocation for R&D within the MNRE has progressively declined in the last three years, from nine per cent to only three per cent in this year’s Budget. 

Budgetary allocations can and do impact the environment around us when, for example, they are able to strengthen and expand municipal services, especially if they are able to also pull in state and municipal funding. But budgetary allocations, especially when they are bundled into funds, such as the NCEF and other financial instruments, also have the ability to attract other finance into activities which enable “pollution avoidance”.

It is time for the finance minister to exploit the multiplicative power of such allocations to drive investments into business models which promote, for example, the briquetting of agricultural residues (whose burning is a prime cause of air pollution) or the installation of rooftop solar electricity plants (which enable energy security as well as mitigate climate change) in a manner that prods competition, leading to price reduction on the one hand, and scaling up on the other.  
 

The writer is Director General, TERI