The finance minister of India has made it clear that the country's clean mobility journey will be powered not just by electricity but through a multi-pronged approach that includes green fuels like biogas, green hydrogen, and ethanol. And oil marketing companies have been envisaged to play a big role in this transition.
Budget 2023–24 has made an allocation of Rs 35,468 crore to the Ministry of Petroleum and Natural Gas. The allocation is in lieu of higher provisions for investment in oil marketing companies, as per the Expenditure Profile document. The fossil fuel retailers have been trying to reinvent themselves with the mainstay expected to fall out of favour, as the country transitions towards sustainable living. IndianOil Corporation for example has already set-up a biomethanation plant in Faridabad with a capacity of 5 metric tonne per day.
The three state-run fuel retailers have also actively started setting up charging stations across retail stations. The need for such a substantial allocation may perhaps stem from the desire to protect the jobs of more than 1 lakh employees and contractual workers engaged with the three state-run fuel retailers alone. Nirmala Sitharaman, in her budget speech, specifically mentioned that green growth efforts are aimed at helping the economy reduce carbon intensity and provide large-scale green job opportunities.
To be clear, biogas and green hydrogen have multiple use cases that go beyond powering vehicles, but one of the most prominent uses of compressed natural gas in India is to fuel commercial vehicles of varying sizes across the country. The government has also set a 5% compressed biogas target aimed at increasing the mix of this clean fuel with CNG. To avoid cascading taxes on blended CBG, the Finance Ministry has announced the exemption of excise duty on GST-paid CBG contained in it. This removes a significant anomaly in the pricing and taxation structure and will reflect in the final selling price.
So where will the clean fuel come from? Well, the finance minister has announced a Rs 10,000 crore outlay to build 200 CBG plants and 300 community- or cluster-based CBG plants under the GOBARdhan—Galvanizing Organic Bio-Agro Resources Dhan—Scheme, which is also aimed at tapping into urban and agricultural waste.
In the same spirit, green hydrogen has also been called out as an important contributor to decarbonising transport, besides hard-to-abate sectors like steel and fertiliser. The Economic Survey 2022–23 calls out the role of green hydrogen in maritime shipping and long-haul transport to enable a low-carbon transition. The finance minister has backed the government's Chief Economic Advisor by allocating Rs 297 crore towards green hydrogen, with the promise of more to come as part of the Rs 19,744 crore mission launched recently. Nirmala Sitharaman echoed the government's target of having an annual green hydrogen capacity of five million metric tonnes by 2030.
Another important area of impact that Budget 2023–24 has touched on is the ethanol blending program. While the outlays to promote increased production of ethanol has nearly doubled from the 2022-23 Budget, the announcement on basic customs duty exemption on denatured ethyl alcohol is a major step. This step can aid the adoption of the E-20 petrol blending target, the target date for which was advanced to 2025-26 from the earlier announced the target year of 2030. Again, a careful reading of the budget speech shows that the focus is on generating co-benefits from the scheme, with a primary focus on aiding the growth of the chemical industry.
None of this takes away from the role to be played by electric mobility in facilitating a transition to low-carbon transport. The budget speech's announcement on continuing the customs duty exemption on capital goods and machinery needed to manufacture lithium-ion cells for electric vehicle batteries is a clear reflection of the importance of electric mobility. With an impetus on promoting 'Made in India' vehicles and encouraging their adoption, the allocation for the 'Faster Adoption and Manufacturing of Hybrid and EV' or 'FAME II' scheme this year has nearly doubled over the past year's allocation at Rs. 5,171 crore.
Budget 2023–24 may have set the pace for India to achieve net zero emissions by 2070, but key to achieving the goal will be the pace and scale of implementation, as the country adopts sustainable mobility.
Rohit Pathania leads Energy & Mobility vertical at OMI Foundation. Arjun Chowdhuri is the head of Strategic Engagements & Communications at OMI Foundation.
The views expressed here are those of the author and do not necessarily represent the views of BQ Prime or its editorial team.
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