Clean energy: Govt is moving away from its plan by diluting the National Clean Energy Fund

New Delhi | Updated: Feb 06, 2017 10:11 AM

By diluting the National Clean Energy Fund, the government is pivoting away from its plan.

hydel-l-reuIndia has set a goal to achieve 175 GW of capacity by the year 2022. (Reuters)

Since 2010, Indian government has shown tremendous commitment towards supporting clean energy, whether it is announcing renewable energy targets and thereon augmenting them, or advocating utilisation of solar power by constituting 121 country International Solar Alliance.

India has set a goal to achieve 175 GW of capacity by the year 2022. This is an ambitious goal given its current renewable capacity is around 46 GW. India has also pledged to reduce its emissions intensity by 33-35% below 2005 levels by 2030.

India’s commitment for renewable energy initially got accentuated during the FY11 Budget, when the government announced the creation of the National Clean Energy Fund (NCEF)—to be maintained by collecting cess on the production or import of coal. The clean energy cess on coal when introduced in 2010 was R50 per tonne, and has been doubled every year since 2014. It was R400 in 2016.

However, the cess is not transferred in entirety to the NCEF. Data from finance ministry shows that since inception, the average share of the cess transfer has been around 40%, and has never exceeded 50%, barring FY15.


Further data shows the amount of utilisation for projects under NCEF has not been encouraging as well, with utilisation in some years as low as 16%.

Just going by the nomenclature of the fund, it was but appropriate for ministry of new and renewable energy (MNRE), to be the sole beneficiary. In the initial four years till FY15, total amount financed from NCEF for projects stood at R3,773.95 crore of which 92% was assigned to MNRE. The share got reduced during the period 2015-17 to 65%. Almost 30% of the total NCEF has been allocated to projects under various ministries primarily to the water resources, river development & Ganga rejuvenation. In fact, a sum of R2,500 crore alone was allocated from NCEF in 2016 Budget for beautification of the river front, National Ganga Plan, and conservation and prevention of pollution of the river Ganga and its tributaries.

Thus, in action and allocation of the NCEF there has been continuous dilution. The fund gets more weakened, with the government in 2016 proposing to change it to National Clean Environment Fund, further diminishing the basic tenets. This will allow a ‘legitimate’ position to use the money from the cess on coal for anything and everything under the green initiative umbrella.

But this would essentially defeat the purpose of initiatives like NCEF, which reasons apart had the potential to make a greater difference in achieving government’s aspirations in renewable energy.

Diluting the support to clean energy technology and utilising the resources towards plan outlays of other ministries is slightly untenable, and reveals contradiction about India’s good intentions.

By the end of the fiscal FY17, the government is estimated to accumulate a total corpus size of R54,336 crore from the clean energy cess on coal. The irony would be that MNRE would have received just 23% of this. India, currently, requires a host of clean energy projects to be supported which would enable many parts to receive electricity, including the Green Energy Corridor, apart from increasing the share of renewable energy in the electricity portfolio.

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Given such a scenario, it may be wise on the part of the government to have a relook at the fund through the prism of the energy crisis, with renewable energy being the only possible solace. It is also of utmost importance to consider reversing the decision to rename the National Clean Energy Fund and limiting the scope of its use. Devising a new revised architecture concentrating on supporting strictly and only renewable energy through the National Clean Energy Fund would be a step in the right direction.

– Rahul Mazumdar is economist, Exim Bank. Views are personal

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