Union Finance Minister Nirmala Sitharaman, in the first Budget under a new coalition government, laid out a series of measures to promote clean energy adoption and develop critical mineral supply chains. She highlighted “Energy Security” as one of the nine pillars for Budget 2024.

The allocation for the solar sector has surged by 75% from the previous year’s revised estimate, now set at ₹86.49 billion (~$1.03 billion). However, the wind energy sector allocation has decreased by 12.7% to ₹8 billion (~$95.6 million).

Domestic Solar Manufacturing

To boost domestic manufacturing, the government has extended the customs duty exemption on goods used in manufacturing silicon wafers and solar cells/modules until March 31, 2026, while reducing customs duties on certain capital goods used in solar cell and module production to zero.

However, to protect domestic industry, duties on solar glass and tinned copper interconnects will be increased from zero to 10% and 5% later in the year.

Meanwhile, some solar-related exemptions are set to lapse on September 30, 2024. These include the concessional duty rate on toughened glass used in solar thermal collectors and the exemption on batteries for electric vehicles.

In a move that may benefit solar project developers, the government has also extended the exemption on electrical energy supplied from Special Economic Zones (SEZs) to Domestic Tariff Areas until March 2026.

Critical Minerals Push

To secure supplies of minerals essential for high-tech and clean energy industries, the government announced a new Critical Mineral Mission. This initiative will focus on domestic production, recycling, and overseas acquisition of critical mineral assets. The mission’s mandate includes technology development, workforce skilling, and establishing financing mechanisms.

In her budget speech, Sitharaman said that “the government will launch the auction of the first tranche of offshore blocks for mining, building on the exploration already carried out.”

Meanwhile, customs duties on 25 critical minerals, including lithium, cobalt, and rare earth elements, have been reduced to zero. This is expected to lower costs for industries dependent on these materials, such as electric vehicles and renewable energy.

Solar Energy and Power Sector

The Budget reaffirmed support for the recently launched PM Surya Ghar: Muft Bijli Yojana, which aims to install rooftop solar plants for 10 million households. The program has already generated over 12.8 million registrations and 1.4 million applications.

For the power sector, the government announced plans to set up a full-scale 800 MW commercial plant using Advanced Ultra Super Critical (AUSC) thermal power technology. This indigenous technology promises higher efficiency.

Pumped Hydro and Energy Storage

The government said it will introduce a policy to promote pumped storage projects, recognizing the need for energy storage to integrate increasing renewable energy capacities. This move is expected to facilitate smoother integration of variable renewable energy into the overall energy mix.

Energy Transition Pathways and Carbon Markets

The finance minister announced plans to develop a comprehensive policy document on energy transition pathways. This strategy will balance economic growth, employment, and environmental sustainability.

The government will formulate a roadmap for hard-to-abate industries to transition from energy efficiency targets to emission targets. This will be accompanied by regulations to shift these industries from the current “Perform, Achieve and Trade” program to an “Indian Carbon Market” system to move towards more market-based mechanisms for emissions reduction.

The 2024 Budget builds on the interim Budget released in February. It emphasized free electricity through rooftop solar, viability gap funding for offshore wind projects with a cumulative capacity of 1 GW and support for electric vehicle charging and manufacturing infrastructure.

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