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India’s annual budget has missed a chance to lay down a roadmap for moving towards a low carbon future

(Image by Dinesh Cayanam)

(Image by Dinesh Cayanam)

The latest Indian Economic Survey has suggested a number of ‘green’ actions the government should undertake. The big ones are effective reduction of subsidies to coal and oil, and a move towards taxing carbon emissions.

In light of the forthcoming series of international negotiations – on Sustainable Development Goals (SDG) and the Paris climate summit – these steps are also important to demonstrate to the world India’s desire to combat climate change. But going by what Finance Minister Arun Jaitley put in India’s annual budget the day after the economic survey was unveiled, we cannot take these prescriptions at their face value. We need to look at them critically.

In principle, a carbon tax is imposed to create an artificial disincentive to consumers to use goods that results in greenhouse gas (GHG) emissions. In India there are excise duties on diesel and petrol and a cess on coal. Jaitley doubled the cess in his budget. The excise duties are effectively higher because the government did not reduce them when global oil prices fell. That has led to Jaitley’s claim in his budget speech that the country is moving towards a carbon tax regime.

The coal sector strenuously resists any attempt to curb consumption of the mineral, but has been silent over the doubling of the cess, now Rs 200 for every ton of coal mined. Why? Industry observers say even if the cess is raised to Rs 500 per ton, it will hardly make a dent in the sector’s current profitability.

Be that as it may, the question is: how is the government going to use this extra money? Since the introduction of the cess in 2013, the renewable energy sector has sought a policy guideline on how this money will be used. There is no such thing yet. The National Clean Energy Fund (NCEF), to which the cess goes, is now sitting on about Rs 16,000 crore.

The NCEF has been used – in part – to fund short term projects. Till October 2014, only 46 projects were approved for funding. Far fewer have actually got any money. Now the government says NCEF will be used to also fund the National Bank for Rural Development and Indian Renewable Energy Development Agency so that they, in turn, can fund renewable energy projects.

But even that is not going to work if projects are going to be funded at the current scale – the funding is too small, and the projects are unable to scale up. So they become unsustainable.

Further a part of the fund was supposed to be used for clean energy research and development. No such project has been approved yet.

In the first full budget of the government led by the Bharatiya Janata Party, there was a chance to lay down a roadmap that would lead to India’s ambitious goal of generating 100 GW through solar and 60 GW through wind by 2022. The chance has been missed.

To the contrary, the budget indicates that environmental safeguards will be diluted for infrastructure projects, to go with Prime Minister Narendra Modi’s stated aim to turn India into a global manufacturing hub. With more manufacturing and more infrastructure development, GHG emissions are bound to rise as well.

Diluting environmental safeguards is a dangerous move and is contrary to what the Prime Minister has been saying to the world – that Indian will ensure protection of the environment and will take ambitious steps to combat climate change.

Before the budget, bureaucrats had prepared frameworks of low-carbon development and other climate actions at central and state levels before the budget, but the finance minister did not allocate any money for this.

Through domestic actions, India can not only safeguard itself from the worst effects of climate change, it can also demonstrate its seriousness in the matter to the world and thus put pressure on developed countries to meet their GHG emission reduction obligations. That was a chance missed in the budget. We are still waiting for much-needed leadership from our policymakers in this field.

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