Budget 2020: Investment in clean air would have cascading benefits for Economy, Brand India

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Updated: Jan 30, 2020 11:23 AM

Budget 2020-21: The finances for this can be mustered by shifting resources from kerosene subsidies, and NCEF.

Budget 2020 India: Instead, the latter should be used again to promote clean energy, including supporting thermal power plants to meet pollution standards.

Union Budget 2020 India: As finance minister Nirmala Sitharaman prepares the FY21 budget, she must recognise that air pollution is a national crisis. Air pollution now impacts every nook and corner of the country. Every Indian now breathes air that doesn’t meet the World Health Organization’s standards, and three-fourths live in places where the air quality does not meet our national standards.

Things are not getting better, either. In 2019, Delhi had some of the worst spells of ‘severe’ air in the last decade. It is now quite common to hear about poor air quality in Mumbai. Who would have thought a decade back that Mumbai, a coastal city, would experience severe air quality? But, it does. And, so do almost all major cities in the country. We know we are losing the battle against air pollution when scientists advise us to wait for wind and rain to reduce pollution levels.

Meteorology aside, we need to do something about air pollution urgently simply because it now significantly affects our health, and the economy. One in eight deaths, or 12.5% of the total deaths, in India can be attributed to indoor and outdoor air pollution. The total number of deaths due to air pollution has increased from 1 million in 2005 to 1.25 million in 2017.

It also costs our economy dearly. Air pollution is leading to travel disruptions, reduced tourists, increased hospital admissions, higher medical bills, premature deaths, lost work hours, missed school days, and damage to Brand India image, among many other tangible and intangible economic losses. Though estimates vary, we are losing at least 5% of our GDP due to air pollution. Considering that the projected GDP growth rate is only about 6% for the next two years, action on air pollution can significantly contribute to growth and development, including giving a much-needed image makeover to Brand India.

The FM must prioritise and scale up financial support to address the pollution crisis. We need a stimulus package in this budget for short- and medium-term actions on air pollution.

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The short-term action is quite apparent. The National Clean Air Programme (NCAP) doesn’t have the resources to catalyse efforts at the city-level. Cities have developed action plans that are too broad, and non-implementable. They need funds to plan better, build capacity, and improve monitoring and enforcement. A multi-year package to support NCAP is required, else the programme would most likely fail.

We urgently need medium-term interventions (over the next five years) for a significant reduction in air pollution levels. In this regard, I have three concrete suggestions for the FM:

Fiscal package to reduce pollution from power plants: The coal-based thermal power sector is India’s most significant source of industrial pollution. It accounts for 60% of particulate emissions, 50% of SO2, 30% of NOx, 80% of mercury emissions, and 70% of the freshwater withdrawal. In December 2015, the environment ministry notified new pollution standards that would reduce various pollutants from the power plants by 50-85%. But, the industry has refused to meet these standards citing reasons like weak balance sheets, and the reluctance of banks to fund pollution control equipment. It has already missed the 2017 deadline, and is unlikely to meet the new 2022 one.

Lately, the industry is demanding relaxation in NOx standards, and a further extension of the deadline to meet the SOx standards. It is also lobbying the government to waive the Goods and Services Tax (GST) compensation cess (earlier called the clean energy cess) on coal to reduce the financial burden of meeting the standards.

I agree with the need to provide financial support, but not with the industry’s proposals. There is no need to relax norms, or remove the compensation cess. Instead, the latter should be used again to promote clean energy, including supporting thermal power plants to meet pollution standards.

The financial requirement to meet these standards is about Rs 70,000 crore. This is equal to two-and-a-half years of the compensation cess. My suggestion to the finance minister is as follows:

Move the use of the coal cess from GST compensation to support clean energy transition, thereby reviving the National Clean Energy Fund (NCEF).

Announce a performance-based fiscal package to help the power sector meet pollution standards. This could be a 15-year loan at prime lending rate, with a typical 70-30 debt-to-equity ratio. I estimate the net return (over loans extended) for this would be over Rs 40,000 crore, which can be redeployed for other clean energy projects. Besides, this would be the most significant air pollution control action, with substantial benefits to the air quality across the country.

National programme to minimise the use of solid cooking fuels: Despite the Ujjwala Yojana’s commendable performance in distributing LPG connections to the poor and the needy, the use of biomass, dung cake, coal, etc, as cooking fuels remains high. Estimates show that about 0.5 million deaths, mostly of women, may be due to indoor air pollution. This also contributes to outdoor air pollution. Any effort to reduce the use of solid fuels would have a cascading positive impact on women’s health and empowerment as well as on the ambient air quality. I would suggest the following:

Announce a national programme to reduce the use of solid cooking fuels by 75% over the next five years. The programme should not only promote LPG but also invest in making electric cooking a reality. Given our excess capacity of coal power and a big target to install renewable energy, the use of electricity for cooking is a natural fit.

The finances for this can be mustered by shifting resources from kerosene subsidies, and NCEF. There can’t be a better use of the coal cess than to reduce drudgery, and improve women’s health.

National ecological restoration programme: Dust pollution is rising in India because of the mismanagement of land, forest, and water resources. Nearly one-third of the land area is undergoing degradation, excluding the Thar desert.

To halt land degradation, we must initiate a large-scale land-management and soil-conservation programme. Such an ecological restoration programme would have the added benefit of groundwater augmentation, biodiversity conservation, and air pollution reduction. The resources for such a programme can be organised by converging programmes like the Compensatory Afforestation Funds, Integrated Wastelands Development Project, MGNREGA, etc.

All the foregoing suggestions would create jobs, boost the economy, improve our ecology, and save the lives of millions of citizens. They also do not need significant additional resources—convergence and channelisation of existing resources would be sufficient. I hope the finance minister considers them worthwhile.

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