Govt uses green energy fund for fiscal balancing
PMO has asked finance ministry to disburse money collected for NCEF to environmental initiatives
New Delhi: Taking a cue from its predecessor, the United Progressive Alliance (UPA), the National Democratic Alliance (NDA) government is using the green energy fund for fiscal balancing.
The Prime Minister’s office (PMO) has also asked the finance ministry to disburse money collected for the National Clean Energy Fund (NCEF) to environmental initiatives that have been sanctioned after it was announced in the 2010-11 budget.
“NCEF is still not being used for its intended use," a person familiar with the matter said, speaking on condition of anonymity.
India, the world’s third-largest emitter of greenhouse gases, created the fund with contributions from the clean energy cess imposed on coal mined in India or imported. NCEF has been managed by the department of expenditure under the finance ministry.
The cess, which came into effect in July 2010 and was collected by the Central Board of Excise and Customs, was raised in this year’s budget to ₹ 200 per tonne of coal.
NCEF initially involved levying a clean energy cess of ₹ 50 per tonne, which was doubled in last year’s budget to ₹ 100 per tonne. The cess at ₹ 100 per tonne aggregates to around ₹ 6,000 crore every year. India is among the few countries in the world to have introduced a carbon tax.
With mining activity expected to pick up in the country after the coalfield auctions, the annual collection is expected to substantially increase to around at least ₹ 36,000 crore a year over the next three to four years.
“The finance ministry is using the NCEF for fiscal balancing. As a result, money which has to be given to the projects is pending. Even the PMO has asked the finance ministry to release the NCEF funds," a government official said, asking not to be identified.
The fiscal deficit narrowed to 4.6% of gross domestic product (GDP) in the year ended 31 March 2014 from 4.9% of GDP in the previous financial year. A tight fiscal situation forced the NDA government to revise its fiscal consolidation roadmap and set a less ambitious fiscal deficit target of 3.9% of gross domestic product for 2015-16 against the earlier target of 3.6% set in last year’s budget. Finance minister Arun Jaitley has deferred the 3% fiscal deficit target to 2017-18 from 2016-17. The fiscal deficit of 4.1% for 2014-15 was achieved through a sharp reduction in plan expenditure.
A second government official aware of the government’s thinking on the utilization of NCEF proceeds said, “The idea is that renewable energy can’t be supported through the subsidy route. The idea is to use NCEF for ambitious initiatives such as the Ganga rejuvenation plan."
The government has set ambitious targets of installing 100,000 megawatts (MW) of solar energy capacity and 60,000MW of wind power capacity by 2022. The ministry of new and renewable energy has sanctioned projects totalling around ₹ 15,000 crore to be disbursed from the NCEF. Of India’s installed power generation capacity of 261,006.46 megawatts (MW), around 61%, or 158,495.89 MW, is coal-based.
Mint reported on 22 July 2014 that money collected through NCEF had been used to plug the budget shortfall by the UPA.
“You know there are always these risks involved in such funds," said a third government official who also didn’t wished to be identified.
Interestingly, the Comptroller and Auditor General of India had raised red flags on the handling of NCEF accounts in its report on the central government’s accounts for financial year 2012.
The government auditor, in its report, said that while ₹ 3,646.01 crore ( ₹ 1066.46 crore in 2010-11 and ₹ 2,579.55 crore in 2012-13) had been collected through clean energy cess, only ₹ 1,066.46 crore was transferred to NCEF.
The NDA government, in a detailed discussion in Parliament in August, confirmed that collections by the green energy fund were used to meet the government’s fiscal deficit by the previous government. While there was around ₹ 12,000-13,000 crore collected in the NCEF, only ₹ 500 crore went to the renewable energy sector and the balance was used for bridging the fiscal deficit.
Queries emailed to PMO spokespersons and the ministries of finance and new and renewable energy on 6 April remained unanswered till press time on Monday.
Experts say that the NCEF should have been tapped for the intended use.
“One can’t use the fund for a purpose other than what was announced in the budget. My view is that a separate statute should have been put (in place) to prevent such misuse," said Pramod Deo, a former chairman of the Central Electricity Regulatory Commission.
Asit Ranjan Mishra contributed to this story.
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