Several positives emerge from an environmental perspective in the Finance Minister’s Budget speech. These include the confirmation of India’s commitment to multilateralism in the quest to find solutions for global environmental issues; the allocation of significant funds for improving the delivery of essential environmental services; and support for sustainable mobility.
The Finance Minister emphasised that the government’s thrust on ‘Atmanirbharta’ or self-reliance did not imply a withdrawal from international engagement. She specifically highlighted India’s initiative in anchoring the International Solar Alliance. This is in line with the Prime Minister’s recent confirmation of the government’s determination to fulfil its Nationally Determined Commitments (NDCs) under the Paris Climate Pact well ahead of schedule, alongside ambitious renewable energy deployment plans of 450 GW by 2030.
Encouraging the quest for new technologies to alleviate the pressure to use fossil fuels, the Finance Minister announced strong support for the National Hydrogen Mission and the development of “Green Hydrogen” as an energy source. She also highlighted the production-linked incentive (PLI) scheme that includes support for solar cells and modules manufacturing, and energy storage batteries.
Perhaps the most important infrastructure segment addressed from an environmental perspective in the Budget was water. The Jal Jeevan Mission (Urban) aims at universal water supply in all 4,378 Urban Local Bodies with 2.86 crore household tap connections, as well as liquid waste management in 500 AMRUT cities.
The Budget also made provisions for the Urban Swachh Bharat Mission 2.0 which will be implemented with a total financial allocation of ₹1,41,678 crore over a period of 5 years from 2021-2026. This is focused on complete faecal sludge management and wastewater treatment, source segregation of garbage, reduction in single-use plastic, reduction in air pollution by effectively managing waste from construction-and-demolition activities and much needed bio-remediation of all legacy dump sites.
To tackle the burgeoning problem of air pollution, the Budget has provided ₹2,217 crore for 42 urban centres with a million-plus population in this Budget. The increased funding will create a systems approach, facilitate cooperation amongst States, and support a planned view on mitigating pollution from key sources like transportation, construction, and other industries. This is also likely to incentivise the adoption of fuel-efficient, environment friendly vehicles.
Strong encouragement for national sustainable mobility has been provided by the allocation to Indian Railways of ₹1.07 lakh crore for significant capital investment, including 100 per cent electrification of the broad-gauge network by December 2023 and the commissioning of Eastern and Western Dedicated Freight Corridors. Mass transport gets an allocation of ₹18,000 crore to support city bus services, allocation of ₹63,000 crore for Chennai metro and ₹14,788 crore for Bangalore metro.
A significant contribution to reducing the stock of older polluting vehicles on Indian streets will also be made by the voluntary vehicle scrapping policy announced in the Budget, to phase out old and unfit vehicles.
The Finance Minister plans to establish a new development finance institution (DFI) with a capital base of ₹20,000 crore. With a lending target of ₹5 lakh crore, this DFI can provide long-term capital financing to several sustainability-related sectors.
A Climate Policy Initiative study suggests that as compared to an annual requirement of $170 billion of sustainable finance between now and 2030, the Indian market presently secures access to only around $17-18 billion. Much more capital must be put to work in sectors like green construction, electrification of transport, energy efficiency, water and waste management.
In addition, new and advanced technologies need to be supported with adequate investments in R&D. The specific needs of MSME companies also need to be addressed with innovative financing structures, including leasing structures and aggregation of investment demand in decentralised projects like effluent treatment plants, zero liquid discharge and rooftop solar projects. The emerging landscape of environmental regulation and investment will present challenges as well as many opportunities. A common complaint of environmental service providers in India is that the lack of strong enforcement presents the biggest hurdle for the growth of this industry. With better compliance, India can see the emergence of homegrown world-class environmental services entities. These could soon spawn a wave of export opportunities in sectors such as consulting, research and data analytics in the environmental sector; manufacturing of mechanical equipment required for all environmental products and projects; and analytical and monitoring software and hardware services for air and water pollution and hazardous wastes.
These themes play well with the increasing thrust of environment, social and governance (ESG) considerations in investments and corporate disclosures across the world. ESG investing is now the fastest growing asset class in the world. It is time for Corporate India to embrace the new focus on ESG and build on the opportunities this presents to move the needle on sustainability while tapping new opportunities for growth.
The writer is Chairman, FICCI Environment Committee and Chairman, ECube Investment Advisors