“Geopolitically, global affairs are becoming more complex and challenging with wars and conflicts. Globalisation is being redefined with re-shoring and friend-shoring, disruption and fragmentation of supply chains, and competition for critical minerals and technologies. A new world order is emerging after the Covid pandemic,” Finance Minister Nirmala Sitharaman said in her interim Budget, which she presented on February 1.

She went on to say, “India assumed G20 Presidency during very difficult times for the world. The global economy was going through high inflation, high interest rates, low growth, very high public debt, low trade growth, and climate challenges. The pandemic had led to a crisis of food, fertilizer, fuel and finances for the world, while India successfully navigated its way…”

The statement from the Finance Minister assumes significance as India meets close to 88 per cent of its crude oil requirements through imports. And any fluctuations in crude oil price, which is highly volatile and unpredictable, impacts the fiscal math of the country.

This is one of the reasons why India has been focusing on energy transition. In fact, in her Budget last year (2023-24) she had provided for ₹35,000 crore for priority capital investments towards energy transition and net zero objectives, and energy security by the Ministry for Petroleum and Natural Gas. Of this, ₹30,000 crore was towards capital support to public sector oil marketing companies — Indian Oil, Hindustan Petroleum and Bharat Petroleum — for green energy and net zero initiatives and the remaining for purchase of crude oil for caverns at Mangalore and Visakhapatnam. Subsequently, based on the recommendations of the Expenditure Finance Committee the support to oil companies was halved and plans to fill the strategic reserves deferred. A reason for this could be the changing dynamics in the oil world.

But continuing with the energy transition story in the latest interim Budget, she announced:

Commitment to meet net zero by 2070 — viability gap funding for wind energy (offshore); setting up of coal gasification and liquefaction capacity, phased mandatory blending of CNG, PNG and compressed biogas; and financial assistance for procurement of biomass aggregation machinery.

Rooftop solarisation — one crore households will be enabled to obtain up to 300 units of free electricity.

Adoption of e-buses for public transport, and strengthening the e-vehicle ecosystem.

A new scheme of bio-manufacturing and bio-foundation.

On paper, all this sounds good. But in the energy space, States also play a vital role and not all of them will follow this narrative.

According to Gaurav Kedia, Chairman Indian Biogas Association, “Agriculture residue like paddy straw, often burned, holds immense potential for bioenergy and soil health. Yet, procurement faces hurdles, including unattractive economics, due to which farmers would rather burn in order to dispose of the straw from the field in a timely manner.”

Investing in logistics would also not be an option due to the straw’s low density, which makes collection, storage and transport expensive, he said, adding, “The government intervention is crucial to incentivise the required machinery, e.g., subsidise combine-harvester, which can efficiently collect straw. Further support for balers and storage units would facilitate efficient transportation and storage.”

Still, the proper mechanism for buyback programmes is lacking, which can offer guaranteed, fair prices to incentivise the sale of biomass over burning. Investing in the right machines is key to unlocking paddy straw’s potential, creating a win-win for farmers, the government, environment, and energy security, he added.

Key challenges

While the Budget has several positive steps towards green energy, some key challenges remain:

Despite increased allocation, the Budget needs to ensure long-term financing solutions to bridge the investment gap for large-scale renewable energy projects, he said, adding that while PLI schemes exist, further incentives are needed to boost domestic manufacturing of critical components, reducing dependence on imports.

He also pointed out that: “The Market Development Assistance scheme is supporting the fermented organic manure coming out of biogas plants, but a scheme similar to SATAT for biofertilizer is still missing. At this crucial juncture, it’s quintessential to value the green component of CBG in form of tradable CBG certificate too.”

The National Solar Energy Federation of India (NSEFI) CEO, Subrahmanyam Pulipaka, said: “Thes announcement of solarisation of 1 crore houses will create a vibrant ecosystem for rooftop solar installers, vendors and technicians. India’s emerging solar manufacturing industry of solar modules will also get a much-needed push thereby making India truly Aatmanirbhar.”

But in order to ensure a smoother implementation of the PM Suryodaya scheme, the government should constitute a body on the lines of the GST Council with States as members so that uniformity in terns of regulations and policies is in place. This is needed to accelerate India’s energy transition, he said.

Many in the industry feel that the market has moved beyond viability gap funding. The key will be implementation.

“The residential rooftop solar programme has always got the push from the government but solar has to grow beyond that and penetrate into the commercial space,” an industry observer pointed out.

In a way the government is trying to solve the huge subsidy which the category gets with schemes like Kusum for farmers. But till open access does not become a complete success, the solar sector will not grow at the desired pace.

While the government has been working towards enhancing the country’s energy ecosystem on the ground, challenges remain. These are mainly infrastructural — for example, in solar it is about storage and grid. Pricing of these energy sources is also an issue which the government will need to address.

For India, a way out will be to work on the entire ecosystem in totality instead of working on each aspect of the energy sector in isolation.