Centre doubles down on gas in budget, cools off on coal

Budget 2021-22 document shows rapid planned expansion in gas distribution however questions emerge over Ujjwala spending

Amidst the chaos of farmer protests and COVID-19 uncertainties, Union finance minister Nirmala Sitharaman presented India’s budget for the fiscal year 2021-2022 on Monday. While the FM made announcements about the government’s push for green hydrogen and increased investments in the renewable sector, her presentation to the parliament made little mention of how the government plans to strategise public spending on conventional energy sources- coal, petroleum and gas. Carbon Copy parsed the budget numbers to bring you key allocation trends and blips which give an indication of the Centre’s priorities for spending on energy.   

Stepping off the coal train

The past year saw the Modi government opening up coal mining to private players with the announcement of the coal auction of 41 mines across the country. The new budget reflects the government’s intentions to decrease the presence of public sector enterprises in the mining arena, to give way to more commercial players. An indicator of this is the amount this government has been allocating to its exploration of coal and lignite.

Recent years have seen a significant rise in allocations towards exploration – from ₹ 175 crore in 2017-18 to ₹ 500 crore in 2018-19 and ₹ 937 crore in 2019-20. The jump, however, failed to be fully reflected on the ground with actual spending of only about 60% seen during the period. For example, of the ₹ 937 crore allocated in 2019-20, the government ended up spending only ₹ 659 crore of that money. Since then, there has been a steady decline in the outlay – from ₹ 700 crore in 2020-21 to the current allocation of ₹ 330 crore in 2021-22 – which is a sizable reduction of 30%. These numbers clearly indicate the government is looking to shift to a coal ecosystem driven more by commercial interest rather than public spending. This cut indicates an encouraging departure from the Centre’s apparent doubling down on coal over the past five years.

Natural gas: Clean, but govt stand unclear

The finance minister’s announcement to extend the Centre’s flagship LPG distribution scheme- Ujwala, to an additional 1 crore beneficiaries received applause from her party colleagues. But the numbers presented in the budget document don’t seem to add up. Under LPG subsidies, the new budget slashed the allocation for Direct Bank Transfers (DBT)of subsidies to a third of what it had allocated last year – from ₹ 35,605 crore in 2020-21 to ₹ 12,480 crore in 2021-22. What’s even more glaring is that while the government had allocated ₹ 1,118 crore to provide LPG connections to poor households in 2020-21, there is no outlay mentioned for it in the coming fiscal year. Further, revised estimates of spending on expanding LPG connections to poor households for last year are some eight times the allocated budget. Experts who spoke to Carbon Copy on conditions of anonymity say that these numbers for subsidy transfers and LPG connections don’t add up when compared to the number of beneficiaries of the scheme. Even accounting for the additional LPG subsidies provided to 8 crore households as part of the government’s COVID relief measures, rough calculations reflect a mismatch of over ₹ 15,000 crore for the year 2021.  

Govt looking to foreign shores for oil and natural gas  

India’s share of natural gas in its energy mix is just 6.2% against a global average of over 23%. Over the past few yea₹ , the government has sought rapid expansion of its natural gas capacity. This year’s budget was no different. The Centre’s backing of gas was evident in the FM’s announcement of plans to expand the National Gas Grid by some 66% to 27,000 km from the current 16,200 km. India will also see100 new districts added to the City Gas Distribution networks despite questionable progress in cities where the nationwide project has already been launched.

While India seeks to become competitive battleground for foreign oil and gas majors such as Rosneft, Shell and Saudi Aramco, the government is also looking to invest in fossil fuel fields overseas. State-owned ONGC Videsh has already invested in producing fields in Russia and Abu Dhabi, and is exploring oil and gas fields in Namibia, Bangladesh, Myanmar and Israel. A closer look at the budgetary allocations in the recent past indicate this shift. So while the government’s allocations for investment in domestic public enterprises such as BPCL and ONGC have remained more or less consistent, there has been a steady rise in its allocation for ONGC Videsh – from ₹ 5,886 crore in 2018-19 to ₹ 8,379 crore in 2021-22.

The discrepancies between the finance ministry’s claims and actual numbers when it comes to the use of natural gas, the government’s increasing push for commercial mining and foreign exploration of oil and gas give a fairly clear indication of what India’s intentions are with fossil fuels. They are here to stay – at least for the foreseeable future.    

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Anushka Mohite

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