Focus on Green Energy Transition at the Core of Union Budget 2023

The budget proposed ₹350 billion capital investment for energy transition


The Union Finance Minister Nirmala Sitharaman laid out an expansive budgetary outlay for expediting green transition as she identified ‘Green Growth’ as one of the seven pillars for Budget 2023.

The budget proposed capital investments of ₹350 billion (~$4.28 billion) for green energy transition, net-zero objectives, and energy security. Additionally, it extended the Basic Customs Duty (BCD) exemptions on several items, including lithium-ion batteries for electric vehicles, to help scale up the adoption of green mobility.

Further, the proposal included government support for battery energy storage projects, compressed biogas infrastructure, a green credit program, and a dedicated transmission corridor for evacuating renewable energy.

ISTS Infrastructure

The government announced that an interstate transmission system (ISTS) for the evacuation of power and grid integration of 13 GW of renewable energy from Ladakh would be constructed with an investment of ₹207 billion (~$2.53 billion), including central support of ₹83 billion (~$1.02 billion).


The budget provided the much-needed impetus to facilitate the adoption of bioenergy in the country. The government allocated ₹100 billion (~$1.23 billion) for the GOBARdhan program, which would support the villages in safely managing their cattle waste, agriculture waste, and organic waste in rural areas.

The program will include 200 compressed biogas projects, including 75 plants in urban areas and 300 community or cluster-based projects.

Further, Compressed Natural Gas (CNG) will be exempt from excise duty to the extent the excise amount is equal to GST paid on biogas/compressed biogas as contained in such blended CNG.

Battery storage

Sitharaman said that for steering the economy on a sustainable development path, battery energy storage systems with a capacity of 4,000 MWh would be supported with viability gap funding (VGF).

Duties and concessions

The proposals said that concession BCD on lithium-ion batteries would be extended for another year.

Further, the concessional BCD has also been retained for another year for the following items:

  • Resin for the manufacture of cast components of wind-operated electricity generators
  • Toughened glass for solar thermal collectors or heaters
  • Forged steel rings for the manufacture of special bearings for use in wind-operated electricity generator
  • Flat copper wire for use in the manufacture of photovoltaic ribbons for solar cells and modules

Additionally, the BCD on coal has been increased to 2.5% from 1% earlier but remains exempted from the Agriculture Infrastructure and Development Cess (AIDC).

The other significant duty proposals whereby the government has retained concessional BCD rates are as below:

Budget 5

Credit Guarantee for MSMEs

The government proposed revamping the credit guarantee program for micro, small, and medium enterprises (MSMEs). The revamped program will take effect from April 01, 2023, through the infusion of ₹90 billion (~$1.11 billion). This will enable additional collateral-free guaranteed credit of ₹2 trillion (~$24.48 billion).

Green Incentives

The government also proposed a Green Credit Program that would be notified under Environment Protection Act to encourage environmentally sustainable and responsible actions by companies, individuals, and local bodies and help mobilize resources for such activities.

Further, the budget said that replacing old polluting vehicles was essential to greening the economy. It added that adequate funds would be allocated to scrap old vehicles of the central government, state government, and ambulances.

In last year’s budget, to facilitate domestic manufacturing for the ambitious goal of 280 GW of installed solar capacity by 2030, the government had allocated an additional ₹195 billion (~$2.61 billion) for the program.

Green Hydrogen

Highlighting the growth of green hydrogen as an alternative fuel, the government reiterated that an investment of ₹197 billion (~$2.41 billion) would be made for the National Green Hydrogen Mission to accelerate the low-carbon dependency process. The government aims to achieve an annual production of 5 MMT of green hydrogen annually by 2030.