26 Jul 2024
In a significant move to bolster India’s green transition, the fiscal 2025 budget has ramped up allocations for renewable energy and power sectors, injecting over ?1.39 lakh crore into these critical areas. The ministry of new and renewable energy (MNRE) and the ministry of power (MoP) received ?0.52 lakh crore and ?0.87 lakh crore respectively, signaling the government's intent to strengthen the energy infrastructure amid rising environmental and economic demands. According to the latest CRISIL M&A report, the budget has notably increased funding for key schemes under the MNRE by 25 per cent from the interim budget. This increase is largely attributed to a 16 per cent rise in allocation to the Indian Renewable Energy Development Agency (IREDA) and the allocation of ?6,250 crore to the Pradhan Mantri Surya Ghar Muft Bijli Yojana for FY 2025. Further boosting the renewable sector, the government announced the removal of basic customs duty on critical minerals like lithium and cobalt, which previously stood at 5 per cent. This strategic cut is poised to reduce the production costs for battery energy storage systems (BESS), a move that complements the viability gap funding (VGF) of ?96 crore for BESS. This funding is expected to aid the addition of 1 GW to India’s battery storage capacity, aiming for a substantial increase to 27-29 GW by 2030. The exemption of basic customs duty for capital goods used in the manufacture of photovoltaic cells and panels continues, alongside the removal of the duty exemption for solar glass to push forward domestic production. These measures are expected to catalyze the setting up of 48 GW of cell and module capacity, significantly reducing solar module import dependency from 50 per cent in fiscal 2024 to 7-10 per cent by fiscal 2027. On the conventional energy front, the government has earmarked ?21,400 crore for setting up several power projects including a new 2,400 MW power plant at Pirpainti. Additionally, financial support will be provided for an 800 MW commercial coal power plant that employs Advanced Ultra Super Critical (AUSC) technology, anticipated to enhance the efficiency of the coal fleet.
Despite the emphasis on clean energy, the allocation for coal projects underscores the necessity to balance immediate power supply needs with long-term sustainability goals. "The focus on coal additions, despite being at odds with India’s clean commitments, is necessary to manage power system requirements where coal is expected to form 50 per cent of electricity generation by fiscal 2030," the CRISIL report highlights. Furthermore, a provision of ?1.5 lakh crore for long-term interest-free loans has been announced to support states in their resource allocation efforts, enhancing their capability to finance and sustain power infrastructure projects.
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