The Union Budget 2024-25 has made significant strides in outlining India’s roadmap towards a robust economic future, placing particular emphasis on energy security and infrastructure development. Dibyanshu, Partner at Khaitan & Co, has emphasised in reaction to the budget.
One of the key highlights of the budget is its strong emphasis on energy security, which Dibyanshu describes as a pivotal priority for “Viksit Bharat” (Developed India). The budget continues to prioritise energy transition, recognising the importance of diversifying energy sources to ensure a stable and sustainable supply.
“The continued emphasis on energy transition, along with the recognition of nuclear energy as a crucial component of the energy mix, is a welcome move,” Dibyanshu stated. The government’s commitment to nuclear energy underscores its importance in achieving a low-carbon future and providing a reliable energy source amidst the growing energy demands.
In a significant policy shift, the budget proposes to fully exempt customs duties on 25 critical minerals and reduce the Basic Customs Duty (BCD) on two of them. This move is aimed at securing the supply chain for essential minerals required for energy production and storage, thereby bolstering trust in India’s path towards energy security. In the current geopolitical climate, where energy resources are often a focal point of international relations, this policy is a strategic step towards self-reliance and resilience.
The budget also acknowledges the critical role of private sector investments in achieving India’s ambitious development goals. Recognising that government resources alone are insufficient to meet the vast infrastructure needs, the budget outlines plans to attract private investment through viability gap funding and supportive policies.
Dibyanshu remarked, “To promote investment in infrastructure, the budget has announced plans to provide viability gap funding and enable supportive policies and regulations.”
Viability gap funding is a crucial mechanism that bridges the gap between project costs and the returns expected by private investors. By committing to this funding, the government is mitigating risks for private players, making it more attractive for them to invest in large-scale infrastructure projects. Additionally, supportive policies and regulations are expected to streamline processes, reduce bureaucratic hurdles, and provide a stable investment climate.
Broader Implications and Industry Reactions
The emphasis on energy security and infrastructure development is expected to have far-reaching implications for various sectors. The renewable energy sector, in particular, stands to benefit significantly from the policies aimed at facilitating the energy transition. The exemption of customs duties on critical minerals will likely reduce costs for manufacturers of renewable energy technologies, making clean energy solutions more affordable and accessible.
The infrastructure sector is also poised for growth, with increased private sector participation leading to the rapid development of transport, logistics, and urban infrastructure. This, in turn, will boost economic activity, create jobs, and enhance the overall quality of life for citizens.
Industry leaders have largely welcomed the budget, viewing it as a forward-looking and pragmatic approach to addressing some of the country’s most pressing challenges. The focus on energy and infrastructure is seen as essential for sustaining economic growth, improving competitiveness, and ensuring long-term sustainability.
