The Union budget pro­vided renewable en­ergy a significant push, but energy eff­iciency continued to take a back seat. The fina­nce minister gave a positive thrust to development of cl­ean energy by anno­uncing the formation of National Cl­e­an Energy Fund for financing research and innovative projects in clean energy technologi­es. Linking the fund’s core co­mposition with a cess levied on co­al (Rs 50/ tonne for Indian and imported coal) probably indicates the peaking of the negotiation formula that India has ad­opted in climate change disc­u­ssion that the polluter pays.

Renewable energy has not been seen as an option to improve India’s energy supply in the past, but now it has certainly been compensated by the importance this budget attaches to renewables to reduce dependence on fossil fuels. The budget acknowledges renewable energy “as a credible strategy for combating global warming and climate change”. The Ladakh region will be one of the first areas in the country to benefit from dedicated budgetary allocation for renewables towards improving energy supply and mitigating climate change through the Rs 500 crore announced for small hydro, solar and micro power projects in Ladakh. However, small and micro hydro power potential in the rest of the country still remains untapped and could have benefited from an all-inclusive allocation to the hydro sector, irrespective of region.

With respect to solar energy, this budget has gone all out to increase the plan outlay for the ministry of new and renewable energy (MNRE) by 61 per cent from Rs 620 crore (2009-10) to Rs 1,000 crore (2010-11). Under the Jawaharlal Nehru National Solar Mission, the budget has provided concessional customs duty of 5 per cent to machinery, instruments, equipment and appliances required for the initial setting up of photovoltaic and solar thermal po­wer generating units. This will certainly enable project developers to benefit from reductions in capital cost. It will be interesting to see if this translates into any significant reduction in electricity tariffs from solar projects. However, the finance minister should have been more aggressive in this important sector as it also addresses energy security. He should have recommended zero per cent duty at least for the next three year to build confidence among investors and exempted it from central excise duty. This is a much-awaited move that will benefit the country in taking forward the solar mission. However, the speech did not mention any budgetary assistance that could be provided to private developers for accessing large tracts of land that will be required to install solar power capacity.

The announcement of exemptions for the CSIR-developed solar-powered rickshaw, soleckshaw, to replace manually operated rickshaws is a boost for solar-based transport and a move to improve air quality of cities as they are likely to replace fossil fuel-based autos as well. This, however, could have been coupled with an announcement of low-interest loans to facilitate the buyers of soleckshaw.

Wind energy: Reducing the basic customs duty on perman­ent magnets — a critical co­mponent for wind operated electricity generators — from 7.5 per cent to 5 per cent was a reiteration of the annou­nce­ment made in the Un­ion budget in 2009. This will certainly benefit wind energy project developers by ma­rginally reducing project co­sts. But the more important move has come with respect to manufacture of rotor blades where the centre has an­nounced central excise exemption for specified items that go into making rotor blades. Given that rot­or bl­ades are one of the most expensive components of wind power plants, which components are actually given exem­ption and how this impacts the overall cost of production remain to be seen.

Geothermal energy received a special mention with an exemption from basic customs duty and special additional duty. With practically no activity in the geothermal arena in India, this announcement certainly makes geothermal heat pumps more attractive than they have been in the past. Again, we feel that there should be no duties on these important clean technologies at least for some demonstration plants. What will be important for this sector is separate exemptions or incentives (based on system size) for residential systems, district systems and systems used for large buildings.

Biomass and biofuels hold huge potential for providing alternative sources of energy and improving decentralised energy access (specially to rural areas). With the budget taking agriculture forward, the large agri-waste sector can feed into a biomass network resulting in additional revenue generation for farmers and ameliorating energy supply. The budget failed to capture this opportunity and did not have any mention of allocation to the biomass sector, be it biomass collection networks, energy plantations or exemptions of any kind.

Energy efficiency did not receive particular mention. There were no indications of increased allocation for the Bureau of Energy Efficiency (BEE) that runs several energy efficiency programmes. Ne­ither did the Accelerated Power Development and Reforms Programme (APDRP), which aims to reduce aggregate technical and commercial lo­ss­es (AT&C) and thus impro­ve viability of state distributi­on utilities, receive a mention. However, the costly LED lig­hts that are staging a debut as a highly energy-efficient sou­rce of lighting for streets, ho­mes and offices received reduction in central excise duty from 8 per cent to 4 per cent, at par with compact fluorescent lamps.

The writer is research associate at Teri