Clean Energy Fund headed nowhere

The clean energy fund is being used more to meet the budgetary shortfall of various ministries than to promote energy-related research and projects.

In the last few years, India has taken a number of concrete steps to propel its economy on a greener, low-carbon pathway. The National Action Plan on Climate Change and National Clean Energy Fund (NCEF) are two such ambitious endeavours.

NCEF was introduced in Budget 2010-11 by then Finance Minister Pranab Mukherjee. Its stated objective was, and remains: "funding research and innovative projects in clean energy technologies".

It has been estimated that so far around Rs 8,200 crore have been collected under NCEF whereas disbursal was about one-eighth of that only. However, severe under-utilisation of NCEF is only one aspect. More worrisome is the way it is being used and administered.

Funds for what? Rather than following its mandate of "funding research and innovative projects in clean energy technologies" in letter and spirit, it seems that this fund is being used by the concerned (and at times unconcerned) ministries to bridge the gap between budgetary allocations and programmatic requirements.

A detailed study titled "Evaluating the Performance of the National Clean Energy Fund" by Gyana Ranjan Panda and Narendra Jena of the Centre for Budget and Governance Accountability, New Delhi, clearly shows that most of the projects that are approved or are under consideration are of routine nature, which should have been funded by the ministries through their regular schemes.

However, even by that yardstick, allocation of Rs 200 crore to carry out preparatory activities under Green India Mission is difficult to rationalise. Now, all these would have been totally acceptable had NCEF been a generic fund to promote clean energy and environment. But after elucidating its objective in no uncertain terms, operation of NCEF as an extension of budgetary process becomes untenable.

Operational shortcoming The other shortcoming of NCEF pertains to the way it is being operated right now. There is an Inter Ministerial Group (IMG) which evaluates proposals given by different ministries. One would have expected that for such a large and important fund, there would be clearly defined priorities against which proposals are asked from a wide spectrum of stakeholders and the evaluation is carried out in a transparent fashion by panels of external experts.

In the absence of such a process, the whole thing becomes more of an inter-ministerial exercise. If one looks at other clean energy funds, for instance those in Canada and the US, two things become very clear. Firstly, the route adopted by them for funding the projects was through request for proposals and secondly, these were based on the competitive process.

The establishment of NCEF raised the expectations that it would help galvanise clean energy-related R& D, especially given the rather moribund research scenario in the field of renewable energy.

It may be recalled that India's Integrated Energy Policy makes it amply clear that "India would find it increasingly harder to import the required commercial energy as India's share of the incremental world supply of oil & gas could be as high as 20 per cent since its demand is growing faster than that of industrialised nations. Research and Development (R&D) in the energy sector is critical to augment our energy resources, to meet India's long-term energy needs, to attain energy independence, to promote energy efficiency and to enhance our energy security....

Energy related R&D has not got the resources that it needs. India needs to substantially augment the resources for energy related R&D and to allocate these strategically."

Obviously, NCEF in its present form does not even attempt to address these very crucial needs. However, it is still not too late to carry out a course correction.

Public investments While no one disputes the urgent need for accelerating diffusion of renewable energy, it is also a fact that R&D in clean and renewable energy in India does not get the kind of attention it deserves. Unless substantial public investments are made in R&D, it would be very difficult to achieve the twin goals of deep cost reductions and rapid indigenisation in this field.

Besides, the NCEF corpus could be leveraged appropriately to bring in additional funds for innovative renewable and other clean energy projects. Insofar as other programmatic requirements of routine nature are concerned, perhaps a small portion of NCEF can be earmarked for the same.

However, predominantly, NCEF must be used ingeniously to provide (a) much-needed impetus to development, incubation, and demonstration of emerging renewable/clean energy technologies and (b) financial capital to early-stage and high-potential projects.

These steps alone will make NCEF what it is mandated to be: a specialised fund for promoting innovations in clean energy. Else, this will remain yet another general pool of funds to meet all and sundry needs of the ministries.

Tags: NCEF, National Action Plan on Climate Change and Nationa, New Delhi, Green India Mission