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Budget Allocation Propels Growth In Renewable Energy And Hydrogen Manufacturing

At the G20 summit, it was announced that incentives could be expected for biofuels and allocations towards building a sea route for the India-Middle East-Europe Economic Corridor


In its upcoming interim budget scheduled for 1 February, the Indian government is anticipated to introduce strategic measures aimed at bolstering the renewable and clean energy sectors, aligning with the nation’s objectives for enhanced energy security, particularly in the context of an election year. Industry analysts and insiders anticipate a blend of populist measures and substantive policy announcements to shape the trajectory of the country’s energy landscape.

Key expectations for the budget include potential relief on the existing 40 per cent import duty on solar modules, a move that could play a pivotal role in advancing India towards its ambitious target of achieving an additional 500 GW of renewable capacity by 2030, according to insights from Mohd. Sahil Ali, a senior sustainability analyst at S&P Global Commodity Insights.

Moreover, there is speculation that the budget may allocate increased funds for renewable hydrogen initiatives, building upon last year’s substantial Indian Rupee 197 billion (USD 2.37 billion) subsidy plan under the National Green Hydrogen Mission. This plan, targeting the production of 5 million metric tonnes of renewable hydrogen annually by 2030, is a crucial element in India’s pursuit of sustainable energy solutions.

Discussions at the recent G20 summit hinted at potential incentives for biofuels, coupled with allocations for establishing a sea route within the India-Middle East-Europe Economic Corridor.

Industry watchers anticipate budgetary provisions for the Bureau of Energy Efficiency to enhance infrastructure and capacity for the Indian Carbon Market. Additionally, the budget may introduce capital expenditure (capex) subsidies and Goods and Services Tax (GST) waivers.

Ankita Chauhan, principal research analyst at S&P Global, expressed appreciation for potential subsidy waivers and incentives specifically directed at renewable hydrogen production, noting the importance of such measures in fostering growth. According to Platts, the assessed price of Saudi Arabia’s hydrogen, produced via alkaline electrolysis, remained steady at USD 2.40/kg on January 29.

Recent market fluctuations have seen a 3.6 percent increase in the price of hydrogen produced via alkaline electrolysis in Japan, reaching USD 3.78/kg on January 26. Industry stakeholders emphasize the need for increased infrastructure financing and the establishment of mandatory consumption targets for hydrogen consumers.

The India Hydrogen Alliance has submitted a budget wish list, requesting a substantial $5 billion National Hydrogen Transition and Development Fund from the Finance Ministry. This fund is intended to support large hydrogen projects, hubs, supply chains, and infrastructure, with a focus on co-developing at least five national hydrogen hubs.

Addressing the imperative of transitioning towards low-emission energy, the government’s draft hydrogen strategy from 2021 outlined mandatory consumption targets for renewable hydrogen in various sectors, including refineries, fertilizers, and city gas distribution.

In a move to incentivize decarbonization, the budget is expected to introduce measures for carbon capture and low-emission technologies. Possible removal of taxes such as a cess of Rs. 400/mt on coal could be contingent on the incorporation of low-emission technologies like Carbon Capture, Utilization, and Storage (CCUS) in coal projects.

On January 24, the government greenlit a scheme, allocating Rs 85 billion, to promote coal and lignite gasification projects by both government and private entities, signaling a proactive stance toward utilizing fossil fuel reserves in a more sustainable manner.

Budget Allocation Propels Growth In Renewable Energy And Hydrogen Manufacturing

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