Union Budget 2021-22: Clean air in focus

The most obvious expectation from the Union Budget 2021-22 has been to see it fast-track post pandemic economic recovery. But the unique expectation has been to see that this activates multiple levers for green recovery when pandemic has dampened ambition for transformative changes needed for tougher targets for clean and low-carbon growth during this decade.

It is encouraging to see explicit acknowledgment of clean air and the real money allocated for it. Also, a combination of more specific strategies that have a strong bearing on air quality and energy savings, including scrapping of old vehicles, augmenting public transport,waste management and advisory on closure of old coal-based power plants, build hope.

However, without the finer details of most of these schemes, it is not yet possible to assess the adequacy of what has been tabled. This, therefore, stokes more expectations.

Support for clean air

Finance Minister Nirmala Sitharaman while acknowledging the need to "tackle the burgeoning problem of air pollution" allocated Rs 2,217 crore for 42 urban centres with over a million population. We may recall that Rs 4,400 crore was allocated to the urban local bodies in 42 million plus cities in the previous budget following the recommendations of the 15th Finance Commission.

The Union Ministry of Finance had released Rs 2,200 crore as the first instalment in November 2020. However, as the initial allocation was delayed due to pandemic disruption, it is too early to assess the impact of that funding.

While committed funding for clean air action is certainly a positive step forward, this also raises the expectation of performance-based budgeting to ensure verifiable improvement in air quality.

'Action taken reports' on clean air action in cities often remain narrowly focused on mechanical sweeping of dust, sprinkler, waste fogger, plantation, traffic synchronisation, composting in isolation from the integrated waste management strategy and so forth.

This limits the scope and scale of systemic changes to get clean and affordable fuels and technology for industry and power plants or to make systemic and infrastructure changes for mobility transition for sustained air quality gains.

In the meantime, the dilemma of affordable clean industrial fuels continues. Even though the new budget has allocated money for expanding city gas distribution to 100 more districts and shown interest in gas future, it has once again shieded away from addressing natural gas pricing to make it affordable for industrial use to sidestep coal.

It is, therefore, hoped that this new clean air funding will enable deeper systemic changes for verifiable air quality gains.

Support for scrapping old vehicles

This year's budget has finally given the go-ahead to the much-awaited vehicle scrappage policy to stimulate the market and get the co-benefits of emissions reduction and fuel savings. This voluntary vehicle scrapping policy is expected to phase out old and unfit vehicles.

Vehicles would undergo fitness tests in automated fitness centres after 20 years in case of personal vehicles and 15 years in case of commercial vehicles. However, details of the scheme are not yet available; the Ministry of Road Transport and Highways is expected to put out the policy soon.

It is hoped that the policy will provide direct incentives for scrapping old trucks and buses and not remain limited to only disincentives for scrapping. It is not clear yet how the voluntary programme will work for the most polluting commercial vehicles that need to be the priority target.

Media reports show that the government may renew its own vehicle fleet but for other vehicle segments, green tax or higher road tax may be imposed on older vehicles to disincentivise ownership.

The states that have already implemented green tax on older vehicles are facing challenges. Without targeted fiscal support for the worst polluters, impact of the stimulus programme may weaken.

But this scrappage-based fiscal stimulus may become a missed opportunity for pushing for targeted electrification. This strategic linking was needed today to help build ambition for electrification of targeted fleet and achieve at least 30-40 per cent electrification by 2030.

Electric vehicle registrations have already suffered a big blow due to pandemic shock, dropping by 93 per cent between March and April. Even after a recovery between April and June, the numbers were still 50 per cent of the pre-COVID levels in March.

This requires a longer-term incentive and support programme to lower upfront cost and total cost of ownership, bring cost parity between electric vehicles and internal combustion engines and build industry confidence.

India cannot widen the divide when major global markets are leveraging economic recovery strategies to build ambition and phase out internal combustion engines.

Support for public transport

Appreciably, after an eager wait, the new budget has launched schemes to support augmentation of public bus transport services and to operate and maintain 20,000 buses at a cost of Rs 18,000 crore.

This scheme will facilitate deployment of public-private partnership models to enable private sector players to finance, acquire, operate and maintain the fleet.

To this is added the plan to expand metro and other light-rail systems. Public transport revival is a critical part of the clean air and climate solution projects. Without a bailout strategy, India could not have aspired to go closer to the target of augmenting national bus fleet to 188,500 as estimated by the Ministry of Housing and Urban Affairs.

Near insolvency during pandemic, poor bankability of the state transport corporations, limited revenue sources with urban-local bodies and disproportionate share of transport-related funding going to road infrastructure have seriously constrained the bus modernisation plan.

During the pandemic, public transport had nearly collapsed. A survey of 14 state road transport undertakings (SRTU) by International Association of Public Transport shows that 81 per cent of the operators have reported no ridership at all during the lockdown phases, while others have reported 90 per cent reduction from the pre-COVID levels.

Annual viability gap-funding need has increased by 69 per cent. Without a bailout package, the public transport strategy could not have revived. This is an important step forward.

More support to add up

There are several strands in the new budget that, if implemented in scale, can add up to maximise air quality gains. Its advisory to shutdown old thermal power plants and the offer of central incentives to states if they plan to disinvest in idle and stranded assets in power sector, are important levers.

Similarly, the support for enhanced swachhta programme for urban India to take forward source segregation of garbage, reduction in single-use plastic, effectively manage waste from construction-and-demolition activities and bio-remediation of all legacy dump sites have a strong potential to reduce air pollution.

This is a good step but needs to go beyond short-term survival to longer-term ambition for transformation.

(Courtesy: Down To Earth)