As India seeks a leadership role in mitigating the global climate crisis, the renewable energy sector is eagerly looking forward to the 2023 Union Budget.
Government support for domestic manufacturing through Production Linked Incentive (PLI) schemes, strengthening the "green hydrogen" policy and enabling greater funding are in the Wishlist of this upcoming sector.
India holding the presidency of G20, where it is expected to pitch for a "Green Development Pact", has also brightened the prospects of a 'greener' Budget this year.
"India's G20 presidency seems to have prioritised the climate agenda. The exceptional performance of its first Sovereign Green Bond this week endorses its intent," says Namita Vikas, Founder and Managing Director, auctusESG LLP, a global advisory company.
Sovereign green bonds are a step towards financing climate action and were announced in the 2022 Budget, in order to achieve net carbon neutrality target by 2070. In a recent auction, sovereign green bonds raised ₹8,000 crore.
"Introducing an institutional mechanism that provides green risk capital and hedging instruments using public capital would help attract private sector capital and achieve the scale in green or climate finance that we need," says Ms Vikas.
The Indian government has been pushing for 'aatmanirbharta' (self-sufficiency) in manufacturing of renewable energy equipment. One example of it is the ₹19,000 crore Production Linked Incentive (PLI) scheme for the production of solar modules announced in the 2022 Budget. Solar modules collect sunlight and convert it into electricity.
According to one report, India's push to indigenise solar manufacturing will require $7.2 billion (over ₹53,000 crore) in expenditure and can create over 41,000 jobs.
"We will welcome measures around increased PLI for solar, which will boost India's solar panel manufacturing capacities," says Anjali Bansal, Founder, Avaana Capital, adding that she also expects subsidies and other measures to promote distributed rooftop solar - a form of power generation - in the upcoming budget.
Despite significant focus on the renewable energy sector - including the launch of green bonds - in the last few years, more needs to be done to bridge the huge funding gap. According to the government, India will need at least $250 billion in funds for the renewable energy sector between 2023 and 2030.
Nisheeth Srivastava, mentor at Terra.do, a climate skilling platform, argues that the Budget must announce a rise in the limit for priority sector lending for renewable energy projects.
"While there is a focus on PLIs to boost domestic production, the sector also needs Viability Gap Funding (VGF) to attract industry players, which can further help the sector to innovate and achieve economies of scale. This will help projects achieve cost viability," adds Mr Srivastava.
Viability Gap Funding (VGF) is a scheme designed to provide capital support to Public Private Partnership projects which would not otherwise be financially viable.
One particular area of interest for industry watchers will be the green hydrogen policy, which was recently approved by the Modi Cabinet with an initial outlay of ₹19,744 crore. The "National Green Hydrogen Mission" aims to make India an international hub for production, utilisation and export of Green Hydrogen and its derivatives.
Green hydrogen is a clean energy which does not emit pollutants and is increasingly being used to decarbonise pollution-heavy sectors of the economy.
"The Union Budget must present a clear roadmap to facilitate demand-and supply-side factors, a financial carve-out for accelerating green hydrogen production, and enable the creation of storage and transport infrastructure," says Ms Vikas.
Mr Srivastava and Ms Bansal add that the Union Budget needs to focus on a PLI to support the production of electrolysers, which help generate green hydrogen.
While there is a much-needed focus on "decarbonising" polluting industries, such a move is also likely to have a negative impact on employment generation. According to a McKinsey report, accelerated "decarbonising" could lead to the loss of six million jobs by 2050. However, the report adds that the impact will be bigger on sectors such as coal mining and enterprises associated with it.
Mr Srivastava stresses on the need for the government to finance the upskilling of workers who may lose their jobs as India moves towards cleaner energy. "There is a need to have investments in institutions to enable skill development for all sorts of stakeholders, especially unskilled and semi-skilled workers," he says.
With India leading the G20 Summit this year, Ms Bansal argues that the government must take the lead and announce measures that encompass adaptation and resilience, not just climate mitigation and emissions reduction. "We hope to see global collaborations in areas such as energy access, alternative fuels, climate-resilience in agriculture, circular economy," she says.