The formation of NCEF or National Clean Energy Fund was indeed the right step towards supporting India’s green energy initiatives. The idea was introduced by the Government of India in 2010-11. And upon receiving huge support, it quickly became India’s carbon tax, on coal to generate fund for research and financing clean energy technology. Currently, the name of NCEF has been changed to National Clean Energy and Environment Fund (NCEEF) to support initiatives for clean environment development.

It should be noted that at the beginning, tax imposed on coal on behalf of NCEF was INR 50 per tonne, which eventually ascended to INR 400 per tonne in 2016-17. It is fairly easy to glean from the context that NCEF could have been identified as a very able supporting column for nascent green energy infrastructure of India.

Post GST Scenario

In April 2017, the news of NCEF transfer to GST compensation fund, in order to compensate states for 5 years had come as a bolt from the blue as it completely defeats the purpose of which NCEF was designed to serve.

Estimates suggest that India has diverted nearly Rs 56,700 crore (unspent amount) from NCEF in 2017. And research shows that transferring unspent money from NCEEF to GST compensation fund will exhaust more than 1 lakh crore of NCEEF over the next 5 years. Thus, removing the relevance of having NCEEF to support green energy growth.

Clean energy fund surely would have offered financial support when the country proceeds through its green energy targets by 2020. However, in the implementation of the GST, the country’s fight against climate change has become collateral damage.

NCEF: A Lost Opportunity for Renewable Energy Industry in India

NCEF was the perfect idea to phase out fossil fuel based energy and speed up climate restoration. Levying tax upon coal would increase the cost of fossil fuels, giving renewable energy- attention, financial help and time it needs to become a mainstream energy source.

However, it is important to note that only half of the total collected cess (29,645.29 Crore) was transferred to NCEF from 2010-2018 (till date). From that amount, the investment towards projects were amount INR 15,911 crores from 2011 to 2017, and MNRE’s share from that amount was INR 11,744.54 Crore from 2010 to 2017.

It is important to note, that since 2010, India has collected more than INR 86,000 crore through clean energy cess by levying taxes on coal mined or imported. This fund would have supported India’s drive towards a cleaner revolution, developing infrastructure and supporting installations.

But surprisingly, no project was financed with NCEF within 2017-18, although the budgetary allocation of NCEF to MNRE was INR 5341 Crore.

In such a scenario, diverting the fund to GST compensation process to states seems the final blow to a well developed platform for renewable energy growth.

The Importance of NCEEF for a Sustainable Future

Surveys show that India has become one of the top green house gas emitters of the world. And as more than 200 million people in the country still don’t have access to electricity, it is very important for the country to opt for green energy applications, rather than clinging on to conventional fossil fuel. And taking the hint, the Government of India has been promoting green energy (especially solar). Although, Government initiatives have made India a lucrative hub for foreign investment on green energy, the country very much needs domestic funds to achieve the success. Considering this, Government of India’s decision of not allocating coal cess to NCEEF discourages clean energy investments and hampers growth of projects.

Estimates suggest that transferring unspent money from NCEEF to GST compensation fund will exhaust more than 1 lakh crore of NCEEF over the next 5 years. Thus, removing the relevance of having NCEEF to support green energy growth.

The Way Forward

From 2010-17, MNRE was only able to get 56% of the NCEEF and going forward there would be no allocation from NCEEF to MNRE. India had a huge opportunity to use the clean energy fund to promote clean energy but has lost on the opportunity. Increase in solar installations would require higher budget allocation to MNRE and allocation of funds not only in projects but also in research and development. Transfer of funds from NCEEF to GST compensations funds will hurt India’s National Solar Energy Mission.

Going forward, the government must compensate MNRE for any non-allocation of budget from NCEEF. Innovative projects need to be financed and supported through special allocation to MNRE. The government still has 4 years to achieve the 175 GW of RE target and this is the apt time for a financial support to MNRE. If required the scope of Clean Environmental Cess can be expanded further to petrol and diesel so that both solar energy and Electrical Vehicles can also be encouraged.

It is the apt time when MNRE needs to be supported given that it may take few years before the results are seen. Re-allocation of funds can potentially hurt the plans but course correction through new allocation of funds will make sure India achieves the 175 GW of RE target by 2022.


Share your thoughts with me on this at @gyaneshc.

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