The Union Budget on Climate Actions

So, here is a quick take on the Union Budget of India which was announced earlier today, from a Climate Action & Transition lens ->

1)      Custom duty cut on lithium, cobalt and other rare earth minerals had been the top EV industry demand, implying another incentive for the two types of EV battery types.

2)      Abolishing angel tax for investment in start-ups seems like a massive move. Links back to the original Start up India commitments. Key is to now see how this along with the Mudra Loan higher ceiling doubling to 20 lakhs, will actually see more startups also in the sustainability space.

3)      I see an important indication at a regional development agenda in this budget, when they talk about creating vegetable growing clusters near major consumption centers (most medium to big urban agglomerations). This is an important step towards food security, logistics challenges navigating and also regional development.

4)      What interests me the most is the 109 high yielding, climate resilient seeds introduced for 32 types of crops. This is the first direct and clear hint of the govt planning towards climate resilience and adaptation, when it comes to agriculture.

5)      The budget has so far "announced" the necessary formation process of carbon markets, establish a climate finance taxonomy and prepare a transition pathway. These are all critical elements to go Net Zero. Now, on to the finer details of these critical climate finance action elements.

6)      For solar energy production items still requiring imports, like those needed in solar cells and panels; the list of capital goods has been expanded. This is a healthy sign for the renewable sectors. Now, an urgent need also for state -level support to encourage more private developers to invest into solar farms.

7)      There is a plan now for transit-oriented development for 14 large cities with a population above 30 lakhs. This can be an insightful pilot, to implement and learn from, as our congested urban areas need a solution on an urgent basis.

8)      Pumped storage policy for electricity storage and help in shift to renewable energy is another important step, to smoothen out the energy transition. Just like with anything power/electricity, the buy-in and equal engagement of the states, will be critical to its success.

9)      The solar roof top scheme is continued. The aim is to get 1 crs household on it. This is bound to be mighty beneficial across the country - the rural areas in particular can and must tap into it.

10)   There is a mention of promoting "natural farming" with 1 crore farmers. That too in a tight timeline of two years. Now, this is one target I will be keenly following. For a mix of factors - which state farmers would end up adopting it the most, and also for how much the productivity would vary in these farm-lands - a logical guess would be that the crop per acre output would go down, and seeing how this would be compensated through better quality and its subsequent crop premium, will be a lesson in agriculture pricing management techniques.

11)   The Small Nuclear Reactors (SMR) solution for spreading nuclear energy in an economical manner across far flung areas, can indeed be a game changer for our renewable energy transition. The safety question, especially for these smaller units, will need to be answered, for a wider adoption.

The three areas of worry / concern are mostly from the perspective of productive employment generation and sustenance in the agriculture and manufacturing sectors. For example,

1)      There are multiple employment linked incentive schemes that have been launched. But the moot of the question is, where are the jobs in the first place? Or are we now going to encourage low-productivity employment also in the manufacturing sector (on the lines of the NREGA for rural areas), to ensure the unemployed figures remain in check? This could hamper the inherent culture of innovation, competitiveness and constant improvement that we expect from the private sector (and should expect even from a lot of our PSU’s).

2)      The govt has said that 10% of the CSR funds can be used for the scheme on the internship opportunities in the 500 companies. So, quite clearly, these are enforced employment generation schemes without any solution for productivity of this employment. I am not too sure how seriously businesses will look at such internships, given its being classified as a CSR and not as core business spends.

3)      Crop insurance budget remained stable, while still not addressing the root structural causes of failure of crop insurance in the first place. If not in the budget, crop insurance needs a structural re-look, to be an important element for ensuring climate risk resilience tool for the farmers. Getting this right, along with working extensively with climate resilient HYV (already part of this budget’s announcement), will be vital for sustaining our agriculture growth.