The Union Government’s annual budget for 2024-2025 (“Budget”) recognizes energy security, and infrastructure sector among the 9 (nine) priority areas. The contents of the Budget are in addition to the announcements made in the interim budget for 2024. 

Infrastructure:

1. Financial Support: The Union Government announced a fiscal outlay of Rs. 11,11,111 crore, which is 3.4% of the GDP of India for capital expenditure. Further, the Union Government also announced Rs. 1,50,000 crore as long-term interest free loans for the State Governments for infrastructure development. Additionally, in order to promote infrastructure development by private sector, the Union Government reiterated its support to VGF and ensuring enabling policies and regulations.

2. Roads: In order to promote road infrastructure, the Union Government announced Phase IV of Pradhan Mantri Gram Sadak Yojana aiming at providing all-weather connectivity to 25,000 rural settlements that have become eligible due to population growth.

Energy Security:

Taking forward the strategy of sustaining high and resource-efficient growth along with energy security, the Government announced the formulation of a policy document outlining suitable energy transition pathways that balances the 3 imperatives, i.e., employment, growth, and environmental sustainability. 

1. Rooftop Solar: Taking note of the positive response to the announcement in the interim budget for 2024, the PM Surya Ghar Muft Bijli Yojana government was launched to encourage rooftop solar installations in India, aiming to provide free electricity to one crore households, covering up to 300 units every month.

2. Pumped Storage: The Budget also outlined a policy aimed at promoting pumped storage projects for electricity storage in order to deal with the intermittent nature of renewable energy and to better integrate the growing share of renewable energy.

3. Nuclear: The Government announced public-private partnership (PPP) model in order to spur the development of small and modular reactors. The PPP model will be utilized for: 

(a) setting up Bharat Small Reactors; 

(b) research & development of Bharat Small Modular Reactor; and

(c) research & development of newer technologies for nuclear energy. 

Further, the Government announced that nuclear energy development will also be eligible to access the corpus of fund focused for research and development in  the interim budget. 

4. Thermal: The budget highlighted the completion of development of indigenous technology for Advanced Ultra Super Critical (AUSC) thermal power plants possessing greater efficiency. In this regard, the Government announced setting up of a joint venture between National Thermal Power Corporation of India and Bharat Heavy Electrical Limited for a 800 MW plant using the AUSC technology. 

5. Hard to Abate Industries: The budget document recognizes a class of industry, i.e., ‘hard to abate’ industries. The Government announced that for such ‘hard to abate’ industries, the obligation will be shifted from the current ‘Perform, Achieve and Trade’ mode to ‘Indian Carbon Market’ mode.

6. Energy Audit of MSMEs: The Union Government announced the launch of an investment-grade energy audit of traditional micro and small industries in 60 clusters, which will be replicated for 100 clusters subsequently. Further, the Gosvernment announced financial support to such industries in order to shift them to cleaner forms of energy and ensuring implementation of energy efficiency measures.

7. Duties: The Union Government announced expansion of the list of exempted capital goods used in the manufacture of solar cells and panels in the country. Additionally, for some raw material, for which there is sufficient manufacturing capacity in the country, the custom duties have been withdrawn. Further, for critical minerals, some of which have application in the renewable energy sector, the custom duty has been relaxed. The custom duty has been waived for 25 critical minerals and the basic custom duty has been reduced for 2. 

8. Allocation: The net allocation under the Budget for the Ministry of Power is Rs. 20,502 crore whereas the allocation for the Ministry of New and Renewable Energy is Rs. 19,100 crore.

This update has been contributed by Rachika A. Sahay (Partner), Mrinal Mishra (Senior Associate) and Anamika Mishra (Associate).

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