Central idea
India’s green transition faces challenges as coal-rich states encounter fiscal implications and regional imbalances. The article emphasizes the need for inclusive development, addressing fiscal concerns, and reviving balanced regional developmentalism to ensure a fair and effective energy transition.
Key issues highlighted in the article
- In August 2023, 5% of grid-connected RE generation came from eight states.
- The Central Electricity Authority’s report projects solar and wind to constitute almost 51% of total generation capacity and nearly 31% of all generated power by 2030.
- The massive RE build-out has mainly benefited western and southern states.
- Research indicates that RE-poor, coal-rich states may face a double hit to state revenues due to declining coal royalties and increasing electricity imports.
- The combined revenue impact could worsen budget deficits of RE-poor power-importing states by almost 8.66% on average.
- Frictions exist between Union and state governments regarding central policies, transmission waivers, and financing struggles in the power sector.
Present Status:
- Recent developments indicate a continued reliance on coal, raising questions about the trajectory of India’s energy transition.
- The dominance of specific states in RE generation highlights regional imbalances.
UPSC mains relevance:
- Ongoing debates on India’s energy transition and challenges in balancing fiscal interests.
- Understanding the role of state finances in achieving national renewable energy goals.
- Familiarity with the potential fiscal impacts of transitioning from coal to renewables in different states.
Key Challenges:
- Declining coal royalties and increasing RE procurement costs pose a fiscal challenge for coal-rich states.
- The combined revenue impact could exacerbate budget deficits of RE-poor states by almost 8.66%, breaching norms established by the Fiscal Responsibility and Budgetary Management Act, 2003.
- Tensions between the Union and states regarding power sector policies, transmission waivers, and centralization of electricity markets.
- The displacement of RE integration costs onto state transmission companies raises concerns.
Relevant Data from Article:
- In August 2023, 92.5% of grid-connected RE generation came from eight states, primarily in the western and southern regions.
- The Central Electricity Authority’s projection expects solar and wind to constitute nearly 51% of total generation capacity by 2030.
Way Forward:
- Revive the philosophy of balanced regional developmentalism, ensuring that RE-poor states have a substantial stake in the energy transition.
- Preferential lending for RE projects in such states by state lenders.
- Reinforce institutions like the Inter-State Council to facilitate greater state participation in federal power negotiations.
- Explicit financial transfers to RE-poor states through the Finance Commission.
- Implement just transition mechanisms for collaborative industrial policies, ensuring a fair distribution of benefits and challenges.
Conclusion:
Ensuring a green transition in India necessitates addressing the fiscal and regional disparities. The revival of balanced regional developmentalism and inclusive policies is crucial to prevent the energy transition from exacerbating existing inequalities. The focus should be on collaborative federalism, just transition mechanisms, and empowering all states to actively participate in and benefit from the ongoing energy transformation.
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