Union Budget 2010: Controlling the dirty and promoting the green

The textile exporters of Tirupur (Tamilnadu) have reasons to believe that the pollution tag associated with the local industry will be washed away; the shareholders of Suzlon Inc are laughing their way to the banks and the forest department in Goa gears up for large scale forestry operations. All the three entities are independent of each other, but what is common to them is that directly or indirectly their operations have affected the local environment. And all three of them have found mention (and fund allocation) in the union budget 2010.

Amid all the skepticism hovering over the climate change debates, questioning of authenticity of the work of Intergovernmental Panel on Climate Change (IPCC), rising conflicts of environment minister with his advisors; the union budget comes as a breather for many who are looking for a national level climate change strategy along with a greener development path for the country.

The budget 2010 takes a two pronged approach to addressing the environment and climate change issues in the country. Using a mix of adaption approaches and prevention strategies, the budget allocates funds for environmental cause and also promotes and supports bodies that will make the shift towards an improved surrounding possible. By doing this it underlines the factors and the actors that the government thinks will influence environmental outcomes in years to come.

Energy sector was big on the agenda of the minister, and the focus was cleaner energy options. Development and promotion of clean energy options was given priority in Mr. Pranav Mukherjee’s budget. The budget outlay for renewable energy was increased by 61%.The Budget also proposed of setting aside funds for solar and small and micro power projects in Ladakh (J&K). This when implemented, will help design an off-grid energy supply model for the isolated locations. The money for the activities comes from National Clean Energy Fund, which in turn is funded by making the users of dirty fuel (read coal) pay.

Although the budget does not introduce the polluter-pays concept to its true spirit, it ensures that the users of coal now have to pay more for using the dirty fuel. And with 50% of India’s energy coming from coal, it was easy for the minister to generate enough revenues to fill the coffers of the National Clean Energy Fund. A cess of INR 50/ ton on the produced and imported coal although does not capture the true cost of pollution, it is a small step in the right direction and indicates the seriousness of the government in controlling the environmental footprint of fuels. Further on the coal agenda is the promotion of ‘Coal Regulatory Authority’ that will help improve performance of the coal industry.

The stimulus to increase the penetration of LED/CFL lights and wind energy will come from the excise cuts and duty exemptions proposed in the budget. Reducing the cost of the products and services, this will help make the options cheaper and attractive for the end users. Some of the other encouraging steps are exemption of import of compostable polymer (used in making bio-degradable materials) from basic customs duty, levying nominal duty on the battery driven cars and vehicles, and promotion of solar-battery powered cycle-rickshaws by exposing it to concessional excise and import duties.

Fund allocation for increasing forest cover in Goa, support for pollution management in Tirupur (Tamilnadu) and increment in the allocation for the National Ganga River Basin Authority ( NGRBA)are other project/ region specific allocations that although don’t create ripples, display the mood of the nation towards environmental concerns.

The approach of union budget 2010 is in sync with India’s commitment to reduce carbon emissions by 25% within next 10 years; although another explanation for actions/policies mentioned in the budget can be environmental Kuznets curve where the economic development is motivating increased focus on environmental quality. Whatever the case may be, the union budget is an indicator that the nation is gearing up to reduce and control footprint of economic and household activities, while slowly introducing the more logical polluter-pays regime. The clean energy fund will go a long way in fulfilling the emission targets committed by India, but most importantly will infuse energy efficiency in the economy. Although the exact details of the fund will be analyzed in days to come, the stocks of the firms dealing in clean energy solutions have already started firming up.