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Despite a few gaps, Budget 2024 has incorporated various climate-focused interventions, offering hope for navigating the challenges of climate change with effective fiscal measures
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This essay is part of the series "Budget 2024-25"
As the risks posed by climate change become more evident, this year’s Union Budget presented a unique opportunity to shape India’s climate action. Energy security and climate resilience feature prominently among the nine key priorities listed for the pursuit of ‘Viksit Bharat’. To achieve this goal, it is essential to drive India’s future growth with clean energy technologies while addressing the impacts of climate change and building resilience. Within this ambit, Finance Minister (FM) Nirmala Sitharaman enlisted a series of measures that will play a significant role in shaping India’s green growth trajectory. However, despite certain commendable interventions included in this year’s fiscal blueprint, it seems to have achieved only partial successes while missing a few critical opportunities in certain climate sectors.
Augmenting productivity and promoting climate-smart agriculture are top priorities in this year's budget, with numerous measures announced to support natural farming, climate-resilient crop varieties, and digital farming. However, there seems to be a disconnect between the priorities listed in the budget announcement and the actual budget allocations for the sector. Despite the FM’s emphasis on transforming agriculture research, funding for R&D within the sector remained low. The Department of Agricultural Research and Education (DARE) was allocated INR 99.4 billion, representing only a slight increase from the INR 98.8 billion allocated in previous financial year. The development and dissemination of climate resilient crop varieties, a top priority within the agriculture sector, will require significant R&D investments, especially in understanding region-wise climate risk and vulnerability at a granular level.
Augmenting productivity and promoting climate-smart agriculture are top priorities in this year's budget, with numerous measures announced to support natural farming, climate-resilient crop varieties, and digital farming.
Moreover, the Budget seems to have overlooked the agrarian-rural economy, which engages the largest segment of the working population. The allocation for schemes like Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) remained stagnant at INR 860 billion, which may significantly undermine climate adaptation efforts. Although MGNREGS is primarily an employment guarantee scheme, a substantial portion of its activities focus on natural resource management and reducing climate vulnerability by improving soil quality, increasing tree cover, and promoting water conservation measures. This scheme has historically played a significant role not only in providing livelihood security but also in improving adaptive capacity of its beneficiaries. Additionally, a significant decline in cthe rop insurance scheme is also likely to adversely impact the adaptive capacity of farmers against climate variability and extreme weather events.
Nevertheless, there are several positives. A renewed emphasis on the sugar industry could significantly help the country achieve its ambitious target of 20 percent ethanol blending by 2025-26. Under the scheme designed to provide financial assistance to sugar mills for the enhancement and augmentation of ethanol production, INR 5.5 billion is budgeted. Moreover, a significant increase in the allocation for schemes like Pradhan Mantri Awas Yojana (PMAY) could also positively impact climate-resilient housing in both rural and urban areas. The rural scheme saw an outlay rise of INR 225 billion while, the urban scheme was allocated INR 80.68 billion, reflecting a notable increase from the previous budget.
The Budget also exhibited a noticeable shift in promoting clean energy, with solar receiving a substantial policy push. The allocation for the Ministry of New and Renewable Energy (MNRE) increased by more than 50 percent compared to the amount allocated in the interim budget, currently standing at INR 191 billion. The allocation for the solar sector also increased significantly, mainly driven by the newly launched PM-Surya Ghar Muft Bijli Yojana that aims to provide up to 300 units of free electricity monthly and promote the adoption of RTS amongst one crore households. Targeted at lower- to middle-income households, the scheme will fund 60 percent of the cost for 2 kw systems and 40 percent of the cost for systems with 2-3kw capacity. While the scheme is a welcome initiative to promote RTS in the residential sector, contentious questions remain regarding certain technical and financial aspects. The FM, in her speech, disclosed that the scheme has garnered a strong public appeal with 1.28 crore registrations and 15 lakh applications. However, the National Portal shows that most applications are for systems averaging around 4 kW, which surpasses the intended capacity. This suggests that individuals residing in substantially larger homes are most likely to benefit from the scheme. Poorer customers may not be able to benefit from the scheme at all due to low property ownership and limited terrace space, both of which are pre-requisites for eligibility. These factors, among others, will need to be addressed for successful implementation of the scheme.
Another important budgetary announcement was for nuclear energy, with an allocation of approximately INR 22.28 billion for nuclear power projects. Recognising the need to diversify energy sources, the budget envisages nuclear energy as a key component of India’s energy transition. The budgetary announcements in this space focused on development of small nuclear reactors in partnership with the private sector. However, currently, this technology is concentrated in China and Russia, and the Budget has indicated that these technologies would be locally developed and not imported from other countries. A similar announcement was made in 2017 when India sectioned the development of 10 traditional reactors, however, none of those reactors are operational yet. The viability of such projects is therefore questionable and will require strong support from the private sector.
Another important budgetary announcement was for nuclear energy, with an allocation of approximately INR 22.28 billion for nuclear power projects.
The Budget also provided for the setting up of a Critical Minerals Mission to augment domestic production. It also proposed exemption of custom duty for 25 critical minerals such as copper, lithium, cobalt, and rare earth elements essential for the energy transition and to ensure their steady supply to relevant sectors. Additionally, the announcement of the development of a guiding policy document with energy transition pathways is also a welcome initiative, as it can assist several stakeholders involved in the clean energy space, facilitating a more cohesive and strategic approach towards green energy transformation.
India has already developed budgetary provisions for disaster risk management and mitigation as per the recommendations provided by the 15th Finance Commission. In addition to the National Disaster Management Fund, a new fund named the National Disaster Mitigation Fund, now transfers funds to the states. The Union Budget allocated funds to selected states like Bihar, Assam, Himachal Pradesh, Uttarakhand, and Sikkim to build flood control structures and implement other flood mitigation interventions. The Government's initiatives to boost funding for flood mitigation highlights the importance of proactive planning to effectively manage climate-induced disasters. However, the focus now needs to be expand to city-specific disaster risk management plans to build resilience against climate induced disasters.
Overall, The Union Budget 2024 entails a robust vision for key climate sectors, marked by substantial investments for promoting renewable energy, increasing policy support for energy storage technologies, augmenting agricultural productivity, and promoting climate smart agriculture. Landmark interventions, such as developing an official climate finance taxonomy to mobilise large scale finance for climate mitigation as well as adaptation were also announced.
The Union Budget 2024 entails a robust vision for key climate sectors, marked by substantial investments for promoting renewable energy, increasing policy support for energy storage technologies, augmenting agricultural productivity, and promoting climate smart agriculture.
However, the Budget’s focus remains limited to certain sectors, with key areas and initiatives like sustainable mobility, green hydrogen, wind sector and climate resilient cities receiving no attention. Historically, Union Budgets have largely focused on grey infrastructure, often overlooking the importance of nature-based solutions as a cost effective and resilient strategy against the impacts of climate change. This year’s budget followed the same trend. Despite these gaps, it has incorporated various climate-focused interventions, offering hope for navigating the challenges of climate change with effective fiscal measures.
Gopalika Arora is an Associate Fellow with the Centre for Economy and Growth at the Observer Research Foundation.
The views expressed above belong to the author(s). ORF research and analyses now available on Telegram! Click here to access our curated content — blogs, longforms and interviews.
Gopalika Arora is an Associate Fellow at the Centre for Economy and Growth in New Delhi. Her primary areas of research include Climate Finance and ...
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