What Budget 2024-25 says about India's energy security and transition roadmap

Big announcements made by Finance Minister Nirmala Sitharaman included private sector participation to develop new technologies for nuclear energy and build small modular reactors, apart from fiscal support for advanced ultra-super critical thermal power plants, and a policy for pumped storage

By Divya J Shekhar Forbes India Staff

Published: Jul 23, 2024 04:17:12 PM IST

Updated: Jul 23, 2024 04:22:48 PM IST

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Govt plans sops for making small modular nuclear reactors Image: Shutterstock

In a first, the Union government has green-lighted private participation in developing nuclear power as part of India’s energy mix. “Nuclear energy is expected to form a very significant part of the energy mix for Viksit Bharat,” said Finance Minister Nirmala Sitharaman in her Budget speech on July 23, adding that the government will partner with the private sector for research and development of newer technologies for nuclear energy, setting up small reactors, and R&D of Bharat small modular reactor. “The R&D funding announced in the interim Budget will be made available for this sector,” she said.

The allocation to the Ministry of New and Renewable Energy (MNRE) has increased to Rs19,100 crore in the Union Budget, from Rs12,850 crore in the interim Budget in February. The allocation to the Ministry of Power has remained unchanged at Rs20,502 crore. As of June, about 54.5 percent of India’s power came from thermal sources (like coal, gas and diesel), while 45.5 percent came from non-fossil fuel sources, which includes 1.8 percent nuclear power capacity, according to the power ministry.

India also wants to build 500 GW (giga-watt) of non-fossil fuel energy capacity over the next six years. This capacity stands at around 200 GW so far, which means building an additional capacity of nearly 50 GW every year till 2030.

Sitharaman stressed on the need to balance economic growth and employment with environmental sustainability concerns—which means ways to reduce dependence on thermal power—and announced that India has completed the development of indigenous technology for advanced ultra-super critical (AUSC) thermal power plants with higher efficiency.

As part of this, a full-scale, 800 MW commercial plant will be set up through a joint venture between the National Thermal Power Corporation (NTPC) and the Bharat Heavy Electricals Limited (BHEL). Fiscal support for this will come from the government. Mainak Chakraborty, co-founder of GPS Renewables, tells Forbes India that while India cannot totally neglect coal, which is the country’s main energy source, this is the way forward, as the technology concerned is already available in India.

The government intends to set up a Critical Mineral Mission for domestic production, recycling of critical minerals, and overseas acquisition of critical mineral assets. There is a proposal to fully exempt customs duty from 25 critical minerals, such as lithium, copper, cobalt and rare earth elements, which are critical for energy transition, apart from other sectors like space, defence, telecommunications and high-tech electronics.

“The Critical Mineral Mission is important for India from a geopolitical perspective and to offset the dependence on China. India needs to attract investment from non-Chinese large players to boost the sector. Also, Indian companies need to be provided lot of incentives to invest in non-Chinese companies mining these critical minerals across the world,” says Chakraborty.

Financing of renewable energy projects will be crucial for the government and industry. In early June, Moody’s Ratings estimated that around $190 billion to $215 billion is required to build this 500 GW capacity by 2030. The analytics firm also estimated that another $150 to $170 billion of investments will be required for electricity transmission and energy storage, while adding that coal will remain a major source of electricity generation over the next eight to 10 years.

Sitharaman announced a long-term plan to develop a taxonomy for climate finance for “enhancing the availability of capital for climate finance, adaptation and mitigation”. This, she said, is towards supporting India’s commitments towards climate and green transition.

“By channelling funds towards sustainable energy projects, including the development of critical minerals and the promotion of green technologies, India is expected to lead the transition to a low-carbon economy,” says Nitin Gupta, co-founder and CEO of e-waste and battery recycling company Attero. According to him, the customs duty exemptions on critical minerals will bolster processing and refining industries at a global level.

The finance minister has also proposed to expand the list of exempted capital goods for use in the manufacturing of solar cells and panels in India. She also said that the rooftop solar scheme has received more than 1.28 crore registrations and 14 lakh applications.

Sambitosh Mohapatra, partner and leader—ESG, climate and energy, PwC India, believes that the Budget focuses on all elements on the energy value chain, and at the core of the Budget, according to him, is the solar rooftop mission that can give a respite to people’s energy bills.

Also read: There is opportunity to create more jobs in the green energy economy: World Economic Forum's Espen Mehlum

“The PM Surya Ghar Muft Bijli Yojana, which aims to install rooftop solar panels on one crore homes and provide up to 300 units of free electricity per month, stands out as a significant initiative. Expanding the list of exempted capital goods for solar energy projects is crucial for accelerating the energy transition,” says Saunak Saha, partner, climate change and sustainability services, EY India, on email. “Additionally, investments in nuclear research and development, along with climate finance for hard-to-abate industries bolster this well-rounded strategy.”

The government intends to formulate a roadmap for companies in hard-to-abate sector for moving from ‘energy efficiency’ targets to ‘emission targets’, which experts say is crucial for the government to achieve its goal of net-zero emissions by 2070. The proposed financial support for MSMEs to transition to cleaner energy forms will be pivotal in fostering positive change at the grassroots level, says Saurabh Kumar, vice president-India, Global Energy Alliance for People and Planet (GEAPP), on email.

The Budget has also introduced a pumped storage policy for addressing intermittency in renewable energy and ensuring grid stability. There were no announcements related to the ambitious green hydrogen mission, which was earmarked Rs600 crore in the interim Budget in February, or anything related to electric vehicles and FAME III. Other missing mentions were about funding for harnessing offshore wind energy potential for initial capacity of 1 giga-watt (GW), and also coal gasification and liquification capacity building to reduce imports on natural gas, methanol and ammonia.