Budget 2023-24 Reactions: Focus on Green Growth

In the Union Budget 2023–24, the Indian finance minister stated that India is making rapid progress toward achieving its net zero targets by 2070. The budget builds on a focus on green growth. It re-iterated that the National Green Hydrogen Mission has been given a budget of Rs 197 billion and 2030 target for producing 5 MMT annually. In addition, a priority investment fund of Rs 350 billion has been allocated for the net-zero goal of the energy transition.

In the storage space, viability gap funding will be provided to support the development of battery energy storage systems with a 4,000 MWh capacity. Furthermore, framework for pumped storage projects were announced. The budget also stated that building an interstate transmission system for the grid integration of 13 GW of renewable energy from Ladakh will cost Rs 207 billion. Also, the Govardhan scheme announced 500 new waste-to-wealth plans to encourage a circular economy. Another key announcement was the custom duty exemption for imports of equipment and capital goods needed to produce lithium-ion cells used in electric vehicle batteries. Renewable Watch provides the edited excerpts of the budget reactions by industry executives on the renewable energy sector….


Pratik Agarwal, Managing Director, Sterlite Power, and Director of Serentica Renewables

“The budget has laid down a promising path for the nation’s green growth, clearly identified as one of the seven pillars, with a sizable outlay of Rs 350 billion. The finance minister has also focused on some of the key issues like battery storage and pumped storage projects to ensure stable and round the clock supplies from renewable resources like solar and wind power. Additionally, the reduction in duties for lithium-ion batteries is a step in the right direction. It has also ushered in a key measure for the financial health of states’ distribution utilities by tying 0.5 per cent of their deficit to power sector reforms. This is an added incentive for the states to reform the distribution companies. However, along with incentive, a disincentive package for the discoms would have proven beneficial. Power sector also merited a bigger budgetary allocation given it is the fuel that is driving India’s growth engine. Overall, the budget has pushed all the right buttons and is well in line with the macroeconomic goals of the country.”

Mahesh Babu, Chief Executive Officer, Switch Mobility limited

“The government’s focus on infrastructure with enhanced capex of Rs 2,700 billion for roads and highways and the budgetary allocation for vehicle scrappage, will certainly accelerate the growth of the CV market in India. Meanwhile, in the EV sector, the government’s move to provide customs duty exemption for import of specified capital goods and machinery required for manufacture of lithium-ion cells for batteries is a welcome move that will play a vital role in making local cell manufacturing cost competitive in the long run. Additionally, green growth being one of the top 7 priorities, with an allocation of Rs 350 billion, is a step in the right direction. This will not just aid economic growth but will also accelerate the growth of the auto industry, especially EVs, as the country transitions towards net zero by 2070.’’

Suhas Baxi, Co-Founder and CEO, BiofuelCircle

“This budget puts a definitive framework in place to achieve a leadership position for India in the renewable energy sector. With ‘Green Growth’ as one of the 7 (Saptarishi) priority sectors, the impetus is clearly towards the decarbonisation journey, green energy transition and employment creation in green energy sector. Biomass opportunity can power about 17 per cent of India’s current energy needs. The biomass harnessing mechanism – its collection, aggregation, processing and storage presents itself as a rural enterprise opportunity at every stage of this supply chain. Not only it helps replace fossil fuels in the industry, but also enables rural empowerment. This impacts even the smallest of the farmer who is the very producer of the Agri-waste or the biomass. Building a circular economy with farmers at its centre, is now within our grasp.”

Pinaki Bhattacharyya, MD and CEO, Amp Energy India

Keeping ‘Green growth’ as one of the 7 priorities of Budget 2023, shows the commitment of the government towards providing continuous thrust to the Green Energy sector in coming years.

Favorable announcements:

  • Providing large outlay of Rs 350 billion for Energy Transition and Zero Emission target by 2070.
  • Increasing Green Hydrogen production to 5 MMT per cent annum by 2030
  • Viability Gap Funding (VGF) for battery solutions of certain capacity and fiscal benefits for pump energy transition to renewables.
  • Green Credit Programme to be notified under the Environment (Protection) Act to incentivize environmentally sustainable and responsive actions towards green growth.

However, there were some misses that the government should have announced to ensure that renewable energy generation capacity ramps up to 40-50 GW per year to meet the 2030 target of 500 GW  by reducing the capital costs, financing costs and adding revenue streams like domestic environmental attributes.

Missed announcements:

  • Inclusion in the ‘project import scheme’ facilitating import at concessional rate of 5 per cent.
  • Reduction of deferral removal of custom duties on import of cells & modules for next 12-18 months till India has 30 GW pf cell and module capacity.
  • Industry’s long pending demand reduction of GST rates to pre-2021 levels for Wind and Solar equipment.
  • Allocation of funds to institutions like IREDA etc. to reduce the cost of financing for renewable energy projects and including the private sector for the green bonds scheme.
  • Extension of date for manufacturing companies for availing lower tax rate of 15 per cent which is currently only valid till 31st March 2024.

Gyanesh Chaudhary, Vice Chairman and Managing Director, Vikram Solar

“The government has shown great consistency in their push towards decarbonising the energy systems by providing landmark allocation towards renewable energy initiatives. The union budget 2023, the 1st budget in Amrit Kaal is visionary and action oriented, focused on empowering the country and building a technology and knowledge driven economy.

We applaud the government for considering ‘green growth’ as one of the seven priorities perfectly titled as “Saptarishi” to guide the country’s growth in the Amrit Kaal.

The finance minister announced that states and cities will be encouraged to create and implement carbon planning strategies, offering VGF support to battery energy storage up to 4,000 MWh capacity, targeting to reach green hydrogen production of 5 million metric tonnes by 2030, offering Rs 207 billion investment to construct interstate transmission system for evacuation of 13 GW of renewable energy from Ladakh and allocation of Rs 350 billion towards achieving net zero goal & energy transition. These are certainly going to be decisive steps towards nurturing green India development.

As one of the leading solar module manufacturers, we are appreciative of the government’s efforts towards nation’s energy security and building a low-carbon economy. We are certain that the union budget 2023 will offer us greater opportunities in building renewable energy powered Atma Nirbhar Bharat.”

Manish Chourasia, Managing Director, Tata Cleantech Capital Limited

“Government is walking the talk when it comes to net zero commitment. Budget has taken bold steps in adopting new initiatives such as dedicated funds for energy transition and green hydrogen mission. In addition, the government has been proactive in identifying the need of storage systems to integrate the ambitious renewable energy capacity plans. Both the VGF for battery energy storage systems and framework formulation for pumped storage projects will pave the way for accelerated adoption of renewable energy.”

Anish De, Global Head of Energy, Natural Resources and Chemicals, KPMG in India

 “As was anticipated the Union Budget continued the push on broad policy towards embracing the energy transition and green growth.  That said there were a number of areas in which the industry would have expected more definitive push through new PLI schemes, larger VGF outlays and driving the overall innovation and manufacturing ecosystem.  Those measures were few and far between in the Union Budget, perhaps pointing to the limited fiscal space available.

The budget could perhaps have been bolder on measures to scale up the clean energy ecosystem rapidly. With rapid demand growth, the power sector is operating on very thin, or even negative operating reserve margins at times. With the strong underlying economic growth, the demand growth is likely to continue. Inadequate generation, capacity expansion could very quickly lead to energy deficits in the coming years.  The spectre of this had shown up last year, primarily on account of coal shortages.  While measures have been taken to fix that, the supply situation remains very tight, and is a cause of worry.”

Vibha Dhawan, Director General, TERI

Vibha Dhawan, Director General, TERI, observed that ‘green growth’ being a priority area in the Union Budget is reflective of the efforts undertaken across sectors to achieve the net-zero targets set for 2070. “The outlay of Rs 19,700 crores for the National Green Hydrogen Mission and the annual production target of 5MMT by 2030 will serve as an impetus to the decarbonization process and reduce the dependence on fossil fuels. So is the provision of Rs 35,000 crores for priority capital investment towards energy transition and net-zero objectives,” said Dr Dhawan.

Observing that the focus on sustainable development cutting across sectors and areas is encouraging, she added, “The Green Credit Programme, which according to the Finance Minister will be notified under the Environment Protection Act, can encourage behavioural change and incentivize environmentally sustainable actions by companies, individuals and local bodies.”

Vibhuti Garg, Director, South Asia, Institute for Energy Economics and Financial Analysis (IEEFA)

“This budget is a mixed bag. While green growth was put among the top seven priorities for India’s budget in the Finance Minister’s speech, the gains for the renewable energy sector have not been very promising. On the positive side, the government announced an inter-state transmission system for evacuation and grid integration of 13 GW renewable energy from Ladakh with central support of Rs 83 billion; VGF for 4 GWh of battery energy storage system; Rs 197 billion under the green hydrogen mission and a green credit programme.

To promote green mobility, the government announced providing funds for replacing old polluting vehicles; decrease in custom duty on import of capital goods for li-ion batteries; increase in budget for the Faster Adoption and Manufacturing of Electric Vehicles (FAME) scheme from budgeted estimate of Rs 29 billion in financial year 2022-23 to Rs 51.72 billion in financial year 2023-24.

The big question arises about how high the capital allocation to the Ministry of Petroleum and Natural Gas (MoPNG) is towards energy transition and net zero objectives? Is the government signaling to develop more strategic gas reserves or gas infrastructure development or helping OMCs tie up with the loss on account of high oil and gas prices? This fine print of allocation to MoPNG needs a better understanding. Further, there has been capital outlay to railways of Rs 2,400 billion, highest ever outlay which is about 9 times the outlay made in 2013-14. Again, the big question is whether it is for passenger traffic or building freight corridors for transportation of coal?”

S N Goel, Chairman and Managing Director, Indian Energy Exchange Limited

“The Union Budget 2023 has outlined a strong foundation for the Indian energy sector, with green growth emphasised as a priority for the government. The Rs 350 billion allocation for energy transition, focus on promoting green hydrogen and incentivising environmentally sustainable actions through the green credit programme, will accelerate decarbonization of the power sector. The emphasis on energy storage projects, critical to scale up renewable energy capacity, complements India’s net-zero carbon emissions target of 2070. With the positive direction provided by the Union Budget 2023, IEX will continue to support the government and industry through new initiatives and technological innovations in energy market.”

Sameer Gupta, Chairman and MD, Jakson Group

 The nucleus of Budget 2023 is enhancing the quality of life, inclusive growth and sustainability. I am sure this vision will narrate the story of “New India, Progressive India”. The green economy is in the centre, and all aspects of the energy transition and security are thoroughly covered. As a result, India should surpass its current standing in the field of renewable energy, including storage and green hydrogen. The government has taken steps to decarbonize the Indian economy, aided by specific budgets- VGF for a 4000 MWh battery storage energy system, pumped hydro, Rs 207 billion investment for renewable energy evacuation from Ladakh, and the inclusion of green credit in the Environment Protection Act.”

Raghunath K, Country Representative, thyssenkrupp India

The Union Budget 2023-24 builds a strong foundation for the future with a focus on clean energy in India. It reflects the government’s continued push towards sustainable growth and energy transition. The target for green hydrogen production, VGF for 4000 MWh battery storage energy system and the renewable energy evacuation plan for the union territory of Ladakh clearly demonstrates this intent to incentivise energy transition. The plan for setting up 200 compressed biogas plants and 300 community and cluster based biogas plants, also demonstrates its willingness to look at all opportunities for building a sustainable ecosystem.”

Ritu Lal, Senior VP and Head – Institutional Relations, Amplus Solar

 “The budget is focused on growth, with continued emphasis on infrastructure, sustainability, and clean energy. The policy announcements regarding the viability gap funding for 4000 MWh of BESS and duty exemptions for machinery required for lithium-ion battery manufacturing are welcome steps considering that storage will play a crucial role in large-scale renewable energy integration into the grid.

The green hydrogen outlay mentioned today was already announced earlier this year. However, to become a global green hydrogen and ammonia player, we have to do much more to minimize the cost of green hydrogen generation. While the Hydrogen policy does look at incentives for electrolyzer manufacturing, we look forward to policies that provide relief from import duty on solar cells and modules to make the input cost of green electricity in Hydrogen production commercially viable.”

Sabyasachi Majumdar, Senior Vice President & Group Head – Corporate Ratings, ICRA Limited

The budget’s focus on green growth reinforces the commitment towards achieving energy transition in the long run. The announcement of a VGF scheme for battery energy storage projects and the stated intent of coming out with a framework for pumped hydro projects is a positive for the renewable energy sector, given the importance of storage for renewable energy sources, which are intermittent in nature. However, the fleshing out of the details is awaited; and timely implementation of these measures will remain crucial. The proposal for investment in transmission lines for large-scale evacuation of green power from Ladakh is likely to support renewable energy capacity addition and grid integration. The already announced National Green Hydrogen Mission with a target to produce 5 MMT of green hydrogen is also a positive, although the cost competitiveness of the same remains a key monitorable. The increased budgetary allocation (Rs 160 billion, 67 per cent increase over financial year 2023) under reform lined result-oriented capex scheme is likely to enable state discoms to augment their infrastructure and thus reduce their operational inefficiencies.

Rajiv Mishra, MD, Apraava Energy

“The Union Finance Minister, Nirmala Sitharaman’s continuation of a 50-year interest free loan to the state government for one more year for spurring investment in infrastructure is encouraging and will certainly serve the purpose of incentivizing the state for complementary policy actions. The increased outlay of Rs 1,300 billion will allow states to continue working on power distribution reforms and enhance power infrastructure including installation of smart meters. The government has allotted a higher amount of Rs 120.72 billion for the reform linked power distribution scheme as against Rs 60 billion spending estimated for the current 2022-23. This doubling of allocation should help in increasing the power supply situation as well as help discoms to move towards a healthier market.

The proposed inter-state transmission system for evacuation and grid integration of 13 GW renewable energy from Ladakh at the cost of Rs 207 billion will facilitate in development of large renewable energy projects in UT which is endowed with abundant solar and wind potential. Above all, the signaling effect of the finance minister announcing green growth as a specific objective of the government will go a long way in giving confidence to the industry in continuing to invest in energy transition.”

Vineet Mittal, Chairman, Avaada Group

“We complement the government for a growth-oriented budget.  The government has remained committed to massive spending on infrastructure – the allocation of Rs 10 trillion will take India to the next orbit of growth. Interest-free loans to states for infrastructure will strengthen this further.

The prime minister Narendra Modi’s panchamrit vision for sustainable development has suitably been addressed in this budget. In this budget, there was a clear focus on green economy, with green growth being identified as part of the seven priority areas or ‘Saptrarishis’ for the government to guide India through the Amrit Kaal. Allotment of Rs 350 billion for priority capital investment for energy transition and net zero will help with the multiplier effect spanning sectors such as green fuel, green energy, green farming, green mobility, green buildings and green equipment.

The industry has long been advocating harnessing Ladakh’s higher solar potential, and allocating capital to create evacuation infrastructure will greatly boost the industry. The Gowardhan Scheme for promoting a circular economy with a total investment of Rs 100 billion is another landmark step and will give a fillip to greening the economy.

Collectively, these announcements, with the earlier announced Green Hydrogen Mission with an outlay of Rs 197.44 billion, will help India to achieve its net zero targets by 2070.

We also applaud the government’s efforts to focus on ease of business through the reduction of compliances and the reforms in contract dispute resolution. This will go a long way in enabling manufacturing, Make in India & Start-up India. Avaada supports the government’s cause at Atma Nirbhar Bharat when it comes to energy, and we will continue our efforts towards this goal.”

Rahul Munjal, Chairman and Managing Director, Hero Future Energies

“Union Budget 2023 focuses on continuing the momentum towards a sustainable India. By earmarking green growth as one of the 7 key priorities, the government has reaffirmed its commitment to decarbonisation and creation of green jobs. The allocation of Rs 350 billion for priority capital investment towards energy transition will help catalyze our net zero journey. The VGF for battery storage projects, significant outlay for grid expansion for renewable energy and the green credit programme to incentivize sustainable behavior are all very welcome and timely steps that will accelerate clean energy adoption. The PM PRANAM scheme will boost the usage of green ammonia for production of environment friendly fertilizers. The policy for scrapping old vehicles and customs duty exemption on Li-ion batteries will also help fast track EVs and clean up the mobility sector.

While all the above announcements are very good and desirable, we would also like to see some additional measures such as extending PLI scheme to manufacturing of wind turbines and electrolyzers, reducing GST on sale of renewable energy components and O&M costs, enabling low-cost project financing, deferring BCD on solar modules and cells till the domestic manufacturing ecosystem matures and establishing a stronger mechanism for monetizing carbon credits. I would also like more clarity on how the government plans to achieve the target of producing 5 MMT of green hydrogen by 2030, especially on matters such as green hydrogen consumption mandates and its transport and storage options, among others.”

Abhishek Nath, Sector Head, Energy and Power Team, and Ammu Susanna Jacob, Research Scientist, Center for Study of Science, Technology and Policy

“One of the seven priorities of the Budget 2023–24 is ‘Green Growth’. The troika of green hydrogen, energy storage (including both battery and pumped hydro), and the investments in energy transition provide the building blocks for a greener power sector. The target of 5 MMT green hydrogen by 2030 also means a sizable investment in the non-fossil power sector. Energy storage will consequently become important to tackle the intermittency in renewable power generation.

While the details are yet to come in, the proposed investment of Rs 350 billion in the energy transition is a very welcome step. Given that these investments will be made through oil companies, it is expected to give a major push to the fossil fuel sector to reimagine itself.

A major push to green power will also come through investment in the transmission infrastructure in Ladakh for the evacuation of 13 GW of renewable power. On the whole, these are welcome steps from the green power perspective, although something more on distributed renewable energy would not have been out of place.

In alignment with India’s net-zero target, the finance minister announced that battery energy storage systems with a capacity of 4,000 MWh will be supported via VGF, and a detailed framework for pumped storage projects will also be formulated. These are welcome steps to enable the seamless integration of renewables in the grid. Currently, there is a limited presence of battery storage in the grid. Though India has an estimated pumped hydro potential of 96 GW, only 3.3 GW is operational (1.48 GW is not operating in pumping mode). Hence, a detailed framework for pumped hydro will increase its adoption in the grid. Further, the VGF and changes to custom duty on the import of capital goods for li-ion battery manufacturing will promote its installation in the grid and aid in green energy transition, in addition to boosting green mobility.”

Niranjan Nayak, MD, Delta Electronics India

“We are firmly aligned with the government’s vision of ‘Amrit Kaal’ which includes a technology-driven, knowledge-based sustainable economy. For the vision of 2070 net-zero carbon dioxide emission, investment in the energy transition will play a crucial role. We at Delta have already implemented many programs for reducing carbon emissions and signed up for many sustainable initiatives like RE100, net zero, green products etc. for a greener tomorrow. Also, all our product offerings are energy-efficient and green solutions that aid in achieving the overall nation’s carbon footprint reduction targets ranging from power quality improvement products to green EV charging solutions etc.”

Harsh Shah, CEO, IndiGrid

“The budget today has envisioned a constructive growth story for India’s future. The increased focus on infrastructure investment whether via a 33 per cent hike in the capital investment outlay or continuation of 50-year interest free long-term bonds for the next fiscal is a conscious effort to build a strong base for future growth. Infrastructure spending whether in roadways, railways, power or traditional infrastructure sectors is likely to have a multiplier effect on India’s growth story. The roadmap to funding via UIDF or opening avenues such as municipal bonds are big steps towards funding infrastructure the inclusive way.

We welcome the continuous and dedicated effort on futuristic India at 100, especially the emphasis on promoting green power and its evacuation, development of a detailed framework for pumped storage projects or looking to deliver 24×7 power with an ambitious VGF funding for 4000 MWh worth of battery-based energy storage projects. This will further promote investment in the energy sector in the country, while meeting sustainable energy goals the country will need to meet around its 100th anniversary of independence. However, we hoped to see clarity on implementation of NMP and NIP as envisaged in earlier budgets. While guidelines for monetisation have been notified at a broader level, the monetisation process is yet to pick steam. We further hoped that this budget would streamline long term capital gain taxation of business trusts in line with listed equities, since securities transaction tax (STT) is already applicable to business trusts. This would have only helped promulgate business trusts further as an investment choice, especially for retails and domestic institutional investors.”

Sumant Sinha, Chairman and CEO, ReNew Power

“We welcome the budget proposals presented by the finance minister. The focus of the budget on expanded support for infrastructure investment, growth of small industry and agriculture sectors, while committing to fiscal consolidation, strikes the right balance. In the context of overall geopolitical and economic outlook, the outlay of Rs 350 billion for energy transition and energy security is a significant step forward. We believe the finance minister has presented a Green Budget that demonstrates the government of India’s unwavering commitment to achieving net zero by 2070.

For the clean energy sector, there are several welcome announcements. Support for battery energy storage systems (requested by ReNew Power during pre-budget consultations), the transmission infrastructure to evacuate power from Ladakh, the allocation for biogas to energy projects and the initiatives for scrapping of old vehicles of the central and state governments are all significant steps in the right direction. We look forward to seeing further details on the recently announced Rs 195 billion allocation for the National Green Hydrogen Mission. The budget will give a thrust to accelerating clean energy in India and ReNew Power is committed to support the Government of India in this endeavor.”

Kush Singh, CEO, Essar Power

“The Union Budget 2022-2023 reflects the country’s rapid economic growth whilst projecting a bright future. The finance minister has based the budget on 7 priorities wherein Green growth has been given a major spotlight which is the current need of the hour for the energy sector. Green hydrogen will emerge as an important instrument to decarbonise the energy value chain, including the corporate sector. The decision to reduce custom duty on lithium ion batteries will promote energy storage to provide round-the-clock renewable power at reduced cost. The amalgamated steps taken will not only help reduce carbon intensity of the economy but will simultaneously help create job opportunities. The ultimate goal is to reduce dependence on fossil fuel inputs and make the country assume technology and market leadership in this sunrise sector. This is a growth oriented budget and the efforts made towards green growth including policies and fund allocations will help us achieve the target of green hydrogen production of 5 MMT by 2030.”

Srinivasan Viswanathan, Chief Executive Officer, Vibrant Energy

 “The budget was progressive and beneficial to the energy sector. The statement on Green Growth is highly comprehensive, with a vision for the green hydrogen mission costing Rs 197 billion, which would undoubtedly accelerate the energy transformation. The promotion of Ladakh green energy corridor is a welcome step. We appreciate the Rs 350 billion capital investment for reaching the net zero goal, however, we look forward to receiving the policy structured in a detailed manner. With this budget announcement, we are encouraged to keep up the rapid expansion in energy production, manufacturing required equipment, and construction of energy storage capacity. We will need to continue having a closer industry-government collaboration to reach the net-zero aim by 2070.”