Indeed, The Union Budget  does recognise the role of boosting up housing, transportation and consumer demand to sustain economic growth. This has been balanced by setting a target of achieving a fiscal deficit target of 3.3% of the GDP through progressive income tax measures, which include a 3% surcharge hike on an income of INR 2 crore and a 7% surcharge on an income of INR 5 crore and above.

It is expected that the housing demand would boost up by offering an increase in the deduction that can be claimed for interest paid on loans, taken for affordable housing by Rs 1.5 lakh to Rs 3.5 lakh per annum for houses valued up to Rs 45 lakh.

The current government in the budget has also declared to infuse INR 70,000 crore capital for PSU banks, which can enhance the money supply within the economy and can also boost the demand and bring the economy back to recovery.

The resultant inflation is still expected to be low from these demand-injection measures within the economy. The government has shown the conviction to borrow in foreign currency and inject money into the economy to create a recovery path. The money from the banks is also expected to be invested in the infrastructure sector like Railways till 2030. An investment of INR 50 lakh crore is envisaged to be made in the Railways sector over the next two decades.

Additionally, the creation of domestic manufacturing, operational and repair industry along with national highways are going to create an impetus of new demand creation.

Schemes like Bharatmala, Sagarmala and UDAN (or Ude Desh Ka Aam Nagrik) are envisaged to minimise the rural urban divide and improve transport infrastructure. This investment push is also complemented by a disinvestment policy of the government where the government will modify the present policy of retaining 51% stake in PSUs.

An introspection
So far so good; but this new demand push in the economy is also going to create a massive incremental energy demand. So, the larger question is – “Will the country be able to meet its new energy demand from renewable energy complemented by efficient energy demand management policies and measures?”

It is over here that the budget looks a little less promising. Reduction of tax rate on electric vehicles from 12% to 5% through the GST council is expected to promote the application of electric vehicles in the transportation sector. The new building facilities, metro transition points and other infrastructure and housing facilities have been planned through the new banking loans.

But what about the supply of energy to the domestic manufacturing, repairing and operations industry? The budget could have mentioned about the role of renewable, clean energy supply to these industries and the mechanism to assure it by taking  energy conservation and demand management measures.

However, it stays silent on this issue. It is true that after the budget declaration, electric vehicles can be now majorly promoted in the proposed upcoming 17 iconic world class tourist sites with the support of the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles or FAME-II scheme by encouraging faster adoption of electric vehicles through the right incentives and charging infrastructure.

But what about the supply of natural gas to the domestic manufacturing, repairing and operations industries in future?

The low hanging fruit
The Union Budget allocates INR 1,035 crore to the Power System Development Fund to revive gas based power units for ensuring a sustained long term supply of gas to various infrastructure and industrial sectors of the economy in order to sustain the growth path. The allocated fund will also be used as a subsidy for state-owned power distribution companies’ or DISCOMs’ purchase of electricity from stranded gas run power plants.

This is expected to revive the economy by addressing the challenge of the stranded assets which are stuck in the sector. For the economy to grow, the problem of stranded assets and NPAs (non-performing assets) of banks associated with the power sector needs to be resolved.
Currently, out of the 24,150 MW gas-based power generation capacity 14,305 MW has no supply of domestic gas, leading to almost about INR 60,000 crore of non-performing assets and decline of average plant load factor to just about 22%.

It has been envisaged to invest of around INR 40,000 crore in the remaining more than 9,000 MW power generation plants that are running at a sub-optimal level.

In 2016, a reverse auction process was initiated for power plants to avail subsidy for buying costly imported gas and regasified LNG. However, after four rounds of reverse auction between June 2015 to September 2016, the process was discontinued. Now the government has come back with the allocation of subsidy for the DISCOMs to buy power from stranded units.

In the meantime, it is also true that while the Gas Authority of India Ltd (GAIL) is sourcing the imported gas, the Gujarat State Petronet has suffered a loss of 50% of its transmission rate, apart from 75% of its marketing margin, while supplying imported regasified LNG to sustain the clean energy demand of the industry sector.

Indeed, while on the economy side, the budget comes up with clear measures, on the aspect of an interlinked, growing clean energy needs and the economy’s transition for that, the budget was silent, and has left room for more thoughts for future to address systemic issues of the Indian economy and the energy sector.

Courtesy: Counter View

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What are the major policy concerns on energy, water, environment, pollution and climate change India would face even as the new government under Prime Minister Narendra Modi takes over? Joydeep Gupta, South Asia Director, The Third Pole, a project initiated by China Dialogue and Earth Journalism Network, takes a look:

Energy

Clean energy and clean mobility are set to get a big boost, and the government may take steps to address the short-term pains that have been caused by recent policy moves by the outgoing government. These moves have stalled the rollout of new solar and wind energy projects. There has been a big policy push for electrification of public transport, but makers of private e-vehicles see this as having happened at their cost.

Coal-fired power plants will continue to function, and there will probably be no fresh move to retire coal plants beyond those already slated for retirement. At the same time, there will be no encouragement to set up new coal-fired power plants.

A huge boost to increase availability of cooking gas is expected. Distribution of nearly 13 million free cooking gas cylinders to poor homes is seen by the BJP as one of the two welfare measures that enabled it to return to power. This scheme is stalling, due to a shortage of replacement cylinders, and the BJP knows this problem needs to be sorted out quickly.

Another scheme that is seen as a success is the one to build 18 million toilets. While the pace of construction has been impressive, the scheme is running into problems because of a lack of sewerage connections, and more importantly, a lack of water.

Water

Water is going to become a bigger problem every day – one-third of India is in the middle of a drought right now, most acute in Maharashtra.

The outgoing government’s attempts to get farmers to move to drip irrigation have not worked. It is unclear if these attempts will be strengthened. It is clear that the BJP will accelerate its pet scheme to interlink India’s rivers and transfer water from the east to the west of the country. Experts have repeatedly stated, and shown, that such a scheme would be unworkable, dangerous and unsustainable, but the ruling party is set upon it.

The new government will accelerate dam building in Jammu and Kashmir in the Indus basin, while sticking to the letter of the Indus Waters Treaty between India and Pakistan. This includes dams with reservoirs on the tributaries of the Ravi – one of the three eastern rivers of the Indus basin. Under the treaty, the waters of the eastern rivers are allocated to India. It also includes run-of-the-river projects on the Chenab and its tributaries, based on the argument such schemes do not hold back water. The Chenab is one of the three western rivers whose waters are allocated to Pakistan under the treaty. Pakistan has been protesting, and so have local residents who have been displaced by the schemes. But the government looks set to continue.

Some hope has been expressed in Bangladesh that India may now sign the Teesta water sharing treaty because the BJP has made significant inroads into the contiguous Indian state of West Bengal, especially in the areas through which the Teesta flows. But policy observers in New Delhi think this setback is likely to make West Bengal Chief Minister Mamata Banerjee (one of the most prominent opposition leaders) even more determined to oppose the treaty. There is an added complication – before West Bengal, the Teesta flows through the Himalayan state of Sikkim, where the ruling party has been voted out after 20 years in power in April 2019. The party that will now be in power is supported by residents who were displaced by the dams and are still protesting about it. The attitude the new state government will take towards the series of dams on the Teesta in Sikkim is not known yet.

No one in New Delhi expects a quick change in the relationship between China and India on the Brahmaputra basin – the largest of the transboundary river basins shared by the two countries. Water policy advisers also think the relationship between India and Nepal on transboundary basins will continue in its old muddled way, while New Delhi will continue to push Kathmandu for quick completion of hydroelectricity projects slated to sell power to India.

The outgoing government failed to clean India’s holiest river Ganga – not to talk of other rivers – despite giving the matter a lot of publicity. It may try to make another big attempt, though experts fear that there are now so many dams near the headwaters of all rivers that they simply do not carry enough water in non-monsoon months to flush out pollutants. Since no one expects the government to decommission dams, all policy observers are emphasising the need to make sewage and industrial effluent treatment plants really work. While useful, this is the same approach that various governments have pursued over three decades, and the Ganga is filthier than ever.

The new government is expected to give a boost to inland water transport. While this is welcomed by almost all, there are concerns about the sustainability of dredging rivers for navigation, when most of the rivers in northern India – notably the Brahmaputra and the Ganga – carry huge sediment loads from the Himalayas, the world’s youngest mountain. There are additional concerns whether the concerns of local communities, such as fisherfolk, are being incorporated into the framework, which will have an impact on the resilience of local communities and eco-systems.

Environment

In 2014, the BJP-led government started by making it easier for entrepreneurs to start factories or mines or to build roads and dams in designated forest areas. Despite criticism from environmentalists, this policy was not only continued but strengthened almost at the end of the term of the outgoing government. Now that the BJP has won a second term, environmentalists are worried that the process of felling trees to make way for infrastructure projects will be accelerated. India is already failing to keep its Paris climate pledge when it comes to planting trees. If the current policy continues, it will fall further back. A notification to amend the process for Environment Impact Assessments released during the midst of elections seems to signal further weakening of environmental protection.

This September, there may be a lot of talk by the government on pushing back the desert, as New Delhi hosts the once-in-two-years summit of the UN Convention to Combat Desertification. What this will mean in the expanding arid and semi-arid zones of India remains to be seen.

Pollution

Air pollution is one issue that figured prominently in the election manifesto of the BJP as well as that of the main opposition Congress party. The BJP manifesto said, “We have evolved technologically better strategies and devices to map the level of pollution in cities and rivers and have taken effective steps to reduce the level of pollution in major cities, including the national capital. We will convert the National Clean Air Plan into a Mission and we will focus on 102 most polluted cities in the country. Through concerted action, we will reduce the level of pollution in each of the mission cities by at least 35% over the next five years.” The party also promised to “work towards completely eliminating crop residue burning to reduce air pollution.” Whether these promises will actually be delivered on is something one has to wait and see.

Pollution of soil and of food are rising concerns – partly as a consequence of soil pollution and partly due to indiscriminate use of chemicals including on livestock, but these have not been publicly discussed. This is becoming a major public health issue – and doctors are hoping for concerted action. But policymakers confessed that they have not really been thinking about it seriously enough.

Solid waste management – especially in cities – remains a huge and unaddressed challenge. It is unlikely that the federal government will do anything significant about it. All policymakers asked about it said this was the job of municipalities and the centre could do little more than help.
Climate change

In many ways, the impacts of climate change actually drove India’s election campaign this April and May, though it was never acknowledged in so many words. In the wake of the BJP victory, policymakers were confident that the government would accelerate moves to adapt to climate change impacts – such as rolling out climate-resilient crop varieties. Asked about mitigation of greenhouse gas emissions, they talked of India’s ambitious plan to generate 225 GW through renewable energy sources by 2022 or even 2020. As for India’s stance at global climate negotiations, the policymakers described it as a non-partisan issue and did not expect any change.

Courtesy: Counter View

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