Energy Sector

India keeps Data Exclusivity out of UK FTA

Context: India safeguards its $25B generic drug industry by excluding data exclusivity from the India-UK FTA to ensure affordable drug access and faster generic launches. India’s stance upholds the TRIPS norms, protecting pharma exports and local manufacturers' interests.

Relevance of the Topic: Prelims: Concept of Data Exclusivity.

Data Exclusivity out of UK FTA:

Recently, India and the UK have announced the conclusion of the free trade agreement (FTA) that will substantially liberalise trade between the two countries.
The UK was pushing for inclusion of Data Exclusivity provisions in the FTA which would have prevented Indian generic drugs manufacturers from using the clinical trial data generated by the pharma patent holders.
India has protected the interest of its generic pharma industry by keeping out data exclusivity provisions from the FTA with the UK. Earlier, India had also rejected a similar demand from the four-nation European Free Trade Association (EFTA) in their FTA signed in 2024.

What is Data Exclusivity?

Data Exclusivity refers to the fixed period during which the non-clinical and clinical trial data submitted by the innovator pharmaceutical company to the regulatory body cannot be used by the generic manufacturers.
Purpose: Protects data generated in the course of clinical trials of a drug. By gaining exclusive rights over this data, innovator companies can prevent their competitors from obtaining marketing licence for low-cost generic versions during the tenure of this exclusivity.

Lack of Data Exclusivity law in India:

The Indian Drug and Cosmetic Act, 1940 and the Drug and Cosmetic Rules, 1945 do not provide for data exclusivity.
Lack of Data Exclusivity law risks unfair commercial use of test data submitted to the Indian government during application for market approval of pharma or agro-chemical products.
Indian laws allow the use of this data by companies to launch copies of the drugs that go off-patent. This reduces time and costs for generic manufacturers. If generic companies were to generate the same data independently, it would delay their generic launches.

India’s generic drug industry is estimated at about $25 billion and the country exports half of its output. Data exclusivity is beyond the provisions of the Trade Related Aspects of Intellectual Property Rights (TRIPS) agreement under the World Trade Organisation.

India-US Cooperation in Energy and Defence Sector

Context: The Vice-President of the United States has highlighted the US’s willingness to cooperate with India more closely on energy and defence. The countries must deepen and institutionalise their cooperation, particularly focusing on critical minerals and nuclear energy.

Relevance of the Topic: Mains: India-US bilateral relations: Agreements in energy, defence, and critical minerals.

India’s Energy Priorities

India’s energy security is guided by three imperatives, at present:
- having sufficient energy resources at predictable prices
- minimal disruptions in supply chains
- progress towards an increasingly sustainable energy mix.
Nuclear energy and critical minerals matter in this respect, and can be the bedrock of further deepening energy and technology partnership.
Major Challenge: China controls about 90% of the world’s processing of critical minerals. It sometimes restricts their exports for strategic goals which poses risks to global supply chains.

India-US Cooperation in Energy and Defence sector:

US-India Energy Security Partnership, including in oil, gas and civil nuclear energy. 123 Civil Nuclear Agreement and plans to build US designed nuclear reactors in India through large-scale localisation and energy transfer.
Strategic Mineral Recovery initiative, a new US-India program for cooperation in recovery and processing of critical minerals, including lithium, cobalt, and rare earth elements, from heavy industries like aluminum, coal mining and oil and gas.
Accelerate R&D and promote investment across the entire critical mineral value chain, through US-led Minerals Security Finance Network and the Mineral Security Partnership.
US-India TRUST (Transforming the Relationship Utilising Strategic Technology) initiative to catalyse government-to-government, academia and private sector collaboration to promote application of critical and emerging technologies like semiconductors, defence, AI, quantum, biotechnology, space etc.
INDUS-X Initiative: Collaboration between India's iDEX (Innovations for Defence Excellence) and the US Defence Innovation Unit to promote innovation in defence technologies, including semiconductors for military applications.

Way Forward

The countries should prioritise long-term strategy and enable cross-sectoral skills and technology exchange in the sectors utilising critical minerals (clean energy, defence, and electronics). This includes increasing cooperation in:
- Exploring and processing critical minerals jointly. Sharing technology and skills.
- Co-investing in mineral-rich countries like those in Africa or South America.
- Building an India-US Mineral Exchange: a digital platform to track trade and investment.
- Creating blockchain-based tracking systems to ensure transparency, like Europe’s Battery Passport.
- Making joint stockpiles of important minerals to protect against future disruptions.
Long-term partnership: It takes 12–16 years to fully develop mines and processing plants, so this partnership must be planned for the long term.
To make this successful, both countries need to encourage innovation through platforms like iCET (India-U.S. Critical and Emerging Technology initiative).

India has the growth potential, while the U.S. has technology and capital. Together, they can create a long-term energy partnership that looks beyond short-term gains and focuses on stability, strategy, and sustainability.

Also Read: India-US TRUST Initiative

Ethanol production from Maize: Fuel vs Feed debate

Context: Ethanol production from Maize has raised its prices, making livestock feed costlier and hurting soybean farmers due to cheaper feed substitutes. Thus, it has triggered a broader fuel vs. feed debate.

Relevance of the Topic: Mains: Biofuels: Food vs fuel debate.

Agriculture is a source of food, feed, fibre and fuel. Traditionally, crops like cotton were used for multiple purposes (lint, oil, cattle feed). Now, maize (corn) is being diverted increasingly toward making ethanol, a biofuel. This has brought the Fuel vs. Feed dilemma to the centre of India’s agricultural and energy policy.

Why is Maize used in Ethanol Production?

Maize grains contain 68-72% starch and 1-3% of other carbohydrates (sucrose, glucose and fructose). Its high starch content (68–72%) makes it ideal for fermentation into ethanol, which is then blended with petrol to reduce India’s fuel import bill.
One tonne of maize gives ~380 litres of ethanol, a 99.9% pure alcohol that can be blended with petrol.
In FY23, sugar mills/distilleries supplied ~31 crore litres of ethanol produced from 0.8 MT of maize. In FY24, this rose to ~286 crore litres, consuming 7.5 MT of maize.
For the FY25 supply year (November-October), oil marketing companies have contracted over 480 crore litres of maize ethanol. The corresponding maize requirement would be over 12.7 MT.

Impact of diverting Maize for Ethanol Production:

The large-scale use of maize for ethanol production has created significant ripple effects across multiple sectors:

Price Surge: The diversion of maize for biofuel has completely upset the demand-supply balance. The surge in demand from it has led to a shortage of grain and pushed up prices. All-India average prices of maize have surged from Rs 14,000-15,000 to Rs 24,000-25,000 per tonne in the last four years.
Feed Shortage: Reduced availability of maize for livestock feed (especially poultry and cattle). Poultry and dairy industries face rising production costs, affecting consumer prices and margins.
Pressure on Soybean Farmers: Ethanol byproduct DDGS (Distillers Dried Grains with Solubles) is now used as a cheaper protein substitute in animal feed. This has reduced demand for soyabean DOC, leading to a 30% drop in soyabean prices. Farmers are selling below MSP causing income distress.
Export Decline: Earlier maize surplus allowed exports (3.7 MT in FY22). With 12.7 MT maize now being diverted for ethanol, exportable surplus has vanished.

Stakeholder Demands:

India now allows up to 0.5 mt of maize imports annually at 15% customs duty, with quantities beyond that attracting 50% duty. Also, it does not permit imports of genetically modified (GM) maize.
The feed industry is urging the government to ensure affordable maize availability for livestock feed to control rising input costs. They are also demanding duty-free import of genetically modified (GM) maize, strictly for ethanol production only, not for food or feed.
Soyabean Farmers demand price support interventions, higher procurement, and promotion of soy-based feed to protect income.

Way Forward

The government should adopt a balanced approach:

Boost domestic maize productivity through better seeds, irrigation, and technology.
Diversify ethanol feedstocks instead of over-relying on maize.
Allow limited imports of GM maize exclusively for industrial ethanol use, with strict regulatory checks.
Support soyabean farmers with MSP enforcement and encourage soy-based feed innovation.

Maize-Ethanol debate underscores the challenge of balancing energy security with food and feed needs. While ethanol production supports India’s green energy goals and offers price benefits to maize farmers, it must not come at the cost of livestock industries or other crop growers like soyabean farmers.

Also Read: What are biofuels?

Is Natural Hydrogen the fuel of the future?

Context: For India, an economy in growth mode with aspirations to reach net-zero emissions by 2070, the exploitation and use of Natural Hydrogen offers a potentially game-changing opportunity.

Relevance of the Topic: Prelims & Mains: Hydrogen as a fuel: advantages; resource distribution; technologies for extraction and harvesting Hydrogen.

Hydrogen Fuel

Hydrogen is the lightest and the most abundant element in the universe.
- On Earth, it is found in compounds like water or hydrocarbons. It must be created and stored before it tends to be utilised.
- Natural hydrogen also occurs as a free gas in geology, produced by processes such as serpentinisation (the interaction of water and iron-containing rocks), radiolysis of water by radioactive rocks, and from organic matter at depth.
Hydrogen Fuel: Presently, Hydrogen fuel is produced by splitting water (H₂O) into its components: hydrogen (H₂) and oxygen (O₂). The hydrogen gas can be used to power fuel cells, which generate electricity through a chemical reaction between hydrogen and oxygen, releasing only water vapour as a byproduct.
If harvested in a sustainable manner, natural Hydrogen may provide a clean and potentially low-cost fuel to satisfy the world’s increasing energy needs with a considerable reduction in carbon emissions as well.

How is Hydrogen Extracted?

Currently, the majority of hydrogen is manufactured from natural gas through an energy-intensive and polluting process.
Green hydrogen can be made using renewable electricity, however, is still prohibitively expensive and would require vast amounts of wind and solar power to work out at scale.

Hydrogen Reserves:

The presence of Hydrogen in coal mines points towards generation from underlying organic matter.
Active mountain ranges with tectonic activity, such as the Pyrenees, Alps, and Himalayas, are being considered as areas for geological hydrogen production.
The fact that Helium co-exists with Hydrogen in a few reserves points towards some geological processes, such as radiolysis, playing a role in its generation.

Hydrogen Reserves in the World:

Hundreds of hydrogen seeps have been catalogued globally in various countries, including Australia (Eyre Peninsula and Kangaroo Island), the US (Kansas, Nebraska), Spain, France, Albania, Colombia, South Korea, and Canada.
An estimated tens of trillions metric tonnes of Hydrogen may be available in geologic stores. If even just 2% of these reserves are commercially exploitable, they would provide about twice as much energy as all the earth’s provable natural gas reserves —enough to meet projected hydrogen demand (500 million tonnes per year) for around two hundred years.

Hydrogen Reserves in India

India’s Hydrogen demand is projected to grow from six million tonnes per year (Mt/year) in 2020 to over 50 Mt/year by 2070 to support its net-zero target. The natural hydrogen reserves are likely present in favourable geological structures like:

Hard rock formations of diverse ultramafic/mafic and basaltic assemblages
Andaman and Himalayan ophiolite complexes
Greenstone volcanic-sedimentary sequences in cratons (Dharwar, Singhbhum)
Sedimentary basis (for example, in Vindhyan, Cuddapah, Gondwana and Chhattisgarh), basement rocks with fractures
Areas where active hydrothermal systems as represented by hot springs exist.

Challenges in Exploration and Excavation of Natural Hydrogen:

Natural Hydrogen exploitation and exploration is not easy. It has technical, logistical, economical, and safety-related challenges.

Accurately locating and quantifying underground hydrogen reserves is the primary challenge. Unlike oil and gas, for which well-established exploration techniques exist, natural hydrogen exploration is still evolving.
Development of efficient and cost-effective extraction technology for natural hydrogen. While modifying current gas industry practices associated with well drilling and extraction facilities, one must consider hydrogen’s specific properties, including its small molecular size and high diffusivity.
Hydrogen extraction also involves specific safety issues as opposed to hydrocarbons because of its high diffusivity and reactivity.

Approaches under-development for Hydrogen Excavation:

Production of hydrogen by drilling and flowing water into rock and then transporting the hydrogen to the surface for collection.
Injecting water with dissolved carbon dioxide into iron-containing rocks that could potentially lead to carbon sequestration as limestone, while simultaneously producing hydrogen.

Also Read: Hydrogen as an alternative fuel: Explained

A comprehensive geological study is essential in India, considering critical factors such as the quality, extent, thickness, accessibility, and hydrocarbon generation potential of the source rock; size and viability of hydrocarbon accumulations; potential losses during migration; and the accessibility of the area for exploration and development.

India’s Hydrocarbon Sector Reforms

Context: India is reforming its upstream oil and gas sector to reduce import dependence and boost domestic production. While policy consistency has improved, the real challenge lies in effective execution and addressing legacy implementation issues.

Relevance of the Topic: Mains: Indian Hydrocarbon sector reforms.

Status of India’s Hydrocarbon sector

India imports nearly 88% of its crude oil and 50% of its natural gas requirements. India’s energy security has been under threat due to its heavy reliance on crude oil and natural gas imports.
Despite a series of policy reforms including the Open Acreage Licensing Policy (OALP), Discovered Small Field (DSF) Policy, Hydrocarbon Exploration and Licensing Policy (HELP), and Natural Gas Marketing Reforms etc., the country has not seen any major new discoveries in recent years.

Key policy initiatives over the last decade to boost domestic production of Oil and Gas include :

Policy under PSC regime for early monetisation of hydrocarbon discoveries, 2014.
Discovered Small Field Policy, 2015.
Hydrocarbon Exploration and Licensing Policy (HELP), 2016.
Policy for early monetisation of Coal Bed Methane, 2017.
Setting up of the National Data Repository, 2017.
Policy to Promote and Incentivise Enhanced Recovery Methods for Oil and Gas, 2018.
Policy Framework for exploration and exploitation of Unconventional Hydrocarbons.
Natural Gas Marketing Reforms, 2020.
Lower Royalty Rates, Zero Revenue Share (till Windfall Gain) and no drilling commitment in Phase-I in OALP Blocks, under Category II and III basins to attract bidders.
Release of about 1 million sq. km. ‘No-Go’ area in offshores, which was blocked for exploration for decades.
The government is also spending about ₹7,500 crore for acquisition of seismic data in onland and offshore areas and drilling of stratigraphic wells to make quality data of Indian Sedimentary Basins available to bidders.

Historically, India’s upstream sector is marked by policy paralysis, opaque licensing, and procedural delays. Policy Execution remains a major challenge, primarily due to legacy issues like bureaucratic delays, coordination hurdles, and infrastructure bottlenecks. This discouraged Foreign Direct Investment (FDI) and led to the exit of global players. While policies like NELP (New Exploration Licensing Policy) aimed to boost private participation, they have failed to yield major discoveries.

Recent Government Initiatives

Amendment to the Oilfields (Regulation and Development) Act, 1948: It is aimed to modernise India’s upstream regulatory framework and aligns it with international best practices. It aims to unlock India's estimated 42 billion tonnes of untapped hydrocarbon reserves.
Establishment of a Joint Working Group: To address industry concerns, the JWG would comprise private E&P operators, National Oil Companies, the Ministry of Petroleum and Natural Gas, and the Directorate General of Hydrocarbons.
Draft PNG Rules Public Consultation Portal: Aimed towards inclusive governance and legal clarity, the portal allows industry and public stakeholders to share feedback on the proposed rules. These rules will guide how the recent amendments to the Oilfields (Regulation and Development) Act, 1948 will be implemented.

Bridging the gap between intent and implementation is essential for unlocking India’s estimated 42 billion tonnes of untapped hydrocarbon potential and ensuring long-term energy security.

Rising power demand in India and the Hydrogen Factor

Context: India is the third highest energy consumer in the world. As India’s economy is expanding, India faces twin challenges- meeting growing energy demand and production of sustainable energy. In this context, India can rely on two alternatives - Nuclear Energy and Hydrogen as an energy source, to achieve a net-zero economy

Relevance of the Topic: Mains: Alternatives to meet the growing Energy demand of India.

India’s Net-Zero Imperative

Presently, the power sector is dominated by fossil fuels (particularly coal) which is used to generate electricity, provide heat and molecules for industrial processes (carbon is used to reduce iron ore to produce steel).
The goal of achieving a net-zero economy by 2070 can be realised only by massive electrification of end uses of energy (from transport to industry).
Solar and wind electricity cannot provide all the electricity that India needs owing to their intermittency, and thus India has to increase the share of non-polluting alternatives like Nuclear Energy and Green Hydrogen, in its energy mix.

Crucial Role of Nuclear Energy

India has set an aspirational target to reach 100 GW of installed capacity based on nuclear power by 2047. As of January 2025, India’s nuclear capacity is 8.18 GW (8180 MW).
Nuclear Power Corporation of India Limited (NPCIL) has announced an ambitious programme to set up several 700 MW Pressurized Heavy Water Reactors (PHWRs). (E.g., 26 units of 700 MW capacity are announced/set to be completed in upcoming years)
Many PSUs and departments such as the Indian Railways are looking to deploy nuclear power plants. NPCIL has invited proposals from the industry for setting up 220 MW PHWRs (Bharat Small Reactors) for its captive use.

Also Read: Nuclear Energy Sector in Union Budget 2025-26

Green Hydrogen or Low-carbon Hydrogen

In the coming years, the share of electricity provided by low-carbon sources (hydro, nuclear, solar and wind) will increase.
Excess/surplus energy can be used to produce green hydrogen or low-carbon hydrogen. It will solve the dual problem of storing excess energy and production of sustainable energy (green hydrogen).
Electrolysers are low-cost equipment and can be operated at different power levels. This hydrogen can be used to meet the energy demand of the end-use industry.

As India races towards the net-zero economy by 2070, India needs a robust energy policy that focuses on expanding Nuclear Energy and leverage low-carbon Hydrogen to handle/utilise surplus energy and meet energy needs.

Also Read: Hydrogen as an alternative fuel: Explained

Hydrogen from Pyrolysis of Biomass

Context: A recent research paper has pitched two efficient ways of producing Hydrogen from biomass, through — Rapid pyrolysis and Microwave-assisted pyrolysis.

Relevance of the Topic: Prelims: Key facts about Hydrogen production through Pyrolysis.

Biomass Pyrolysis and Hydrogen Production

Pyrolysis is a thermochemical process of degradation of biomass by heat in the absence of oxygen. This results in the production of bio-charcoal, bio-oil, and syn gas (rich in Hydrogen).
- Agricultural waste is heated at high temperature without burning it.
- This heating breaks down the biomass into different products.
Pyrolysis can help:
- Produce Hydrogen and help India meet its renewable energy goal.
- Produce biomass charcoal, which helps capture carbon and improves soil health.
- Utilise large amounts of biomass available in the country (burning of which otherwise produces greenhouse gases).

Advanced Pyrolytic Methods:

1. Rapid Pyrolysis:

Rapid pyrolysis requires 400–600 degree C temperature and heating rate of 10–100 degree C per minute.
Rapid pyrolysis processes the raw material in merely 0.5–2 seconds, compared with at least 30 minutes in conventional pyrolysis, and is more efficient.
The yield from fast pyrolysis includes 35–50% bio-oil, 20–30% biochar, and 15–25% syngas.

2. Microwave Pyrolysis:

Microwave pyrolysis uses electromagnetic waves to instantly heat biomass. It is usually carried out in a low-oxygen or oxygen-free environment at 500-700 degree C.
The primary goal is to improve energy transfer and hydrogen production rate using biomass. It provides fine heating control and focused energy absorption, thereby making it more efficient.
In microwave pyrolysis, heat transfer occurs directly within the feedstock through convection rather than conduction, eliminating the need for external drying of biomass.

Challenges:

Ensuring regular supply of biomass feedstock from agriculture and forestry. Proper controls and different feedstocks are needed to reduce product variation.
Tailoring Reactor design, operating conditions, and catalysts to suit Indian biomass resources to optimise hydrogen production.
Inadequate infrastructure (poor road networks and transportation systems) can limit supply-chains and thus increase project cost.

Aviation Turbine Fuel & Sustainable Aviation Fuel

Context: The Civil Aviation Ministry pointed out that high value-added tax (VAT) rates on aviation turbine fuel (ATF) imposed by certain states in India contribute significantly to increased airfare.

Relevance of the Topic: Prelims: Key facts about Aviation Turbine Fuel (ATF); Sustainable Aviation Fuel (SAF).

Aviation Turbine Fuel (ATF)

ATF is a type of aviation fuel designed for use in aircrafts and jet engines.
Constituents: Jet fuel is a mixture of a variety of hydrocarbons. The most common ATF is Kerosene-type jet fuel.

Concerns:

Price-sensitive: The price of ATF is a major component of the operating cost of airlines, and the tax on ATF significantly contributes to the ATF price. The Ministry of Civil Aviation has long advocated for bringing ATF under GST (Goods and Services Tax) to eliminate tax disadvantages faced by domestic airlines compared to foreign carriers.
Environmental pollution: ATF combustion in aircraft engines releases various pollutants like Nitrogen oxides, Carbon monoxide, Particulate matter etc. leading to ozone layer depletion and global warming.

Sustainable Aviation Fuel (SAF)

SAF is a biofuel alternative to conventional jet fuel with a smaller carbon footprint.
It can be blended with conventional jet fuel (with blending limits ranging 1%-50%).
Sources of SAF:
- Oil seeds, other fats, oils, and greases
- Residues- agricultural, forestry residues, wood mill waste
- Wastes- municipal solid waste, sludge and wet waste
- Produced synthetically by capturing carbon directly from the air.

Advantages:

Engine compatibility: can be used in existing aircraft and infrastructure.
Fewer emissions: 100% (pure) SAF has the potential to reduce greenhouse gas emissions by up to 94% depending on feedstock and technology pathway.
Sustainable: SAF feedstock does not compete with food crops, neither causes forest degradation.

Challenge:

Expensive: SAF is about four times more expensive than petroleum jet fuel.

SAF indicative blending Target:

In 2022, members of the International Civil Aviation Organisation had agreed to a long-term aspirational goal of net-zero carbon dioxide (CO2) emissions from aviation by 2050, and SAF has long been seen as the industry's fastest way to reduce emissions.
In 2023, Indian government has set the following initial indicative blending percentages of SAF in ATF:
- 1% SAF indicative blending target in 2027 (Initially for International flights).
- 2% SAF blending target in 2028 (Initially for International flights )
- 5% by 2030.

The success of SAF will require using a greater diversity of feedstock and production methods. This includes areas such as investing in carbon offset programmes and the diversification of SAF feedstocks.

Renewable Energy Expansion in India

Context: As of the latest data from the Central Electricity Authority, India's renewable energy (RE) sector is witnessing a significant expansion, with a substantial portion of RE capacity under construction.

Relevance of the Topic: Prelims: Renewable Energy: Key Trends; India’s RE Target.

Key Highlights of Renewable Energy Expansion

Total Installed Capacity: India currently has over 167 GW (1,67,709 MW) of installed RE capacity, including (including about 12,000 MW non-wind and non-solar sources such as biomass and small hydro).
Under-construction RE capacity of over 142 GW (1,42,667 MW) of RE, with the highest share from solar energy (over 82 GW), followed by solar-wind hybrid and wind energy projects.
Gujarat, with over 46 GW of RE capacities under construction, leads the way in India’s RE development.

India’s RE Target

India has set a target to achieve at least 500 GW (gigawatts) of non-fossil power capacity by 2030, up from its current 165 GW (2024).

Central Public Sector’s Role in Renewable Energy Development:

Four central public sector companies (CPSEs) under the Ministry of Power are involved in the construction of renewable energy plants, contributing to 8% of the total under-construction capacity.
NTPC’s leadership: NTPC is at the forefront with 5,417 MW of renewable energy projects under development, followed by SJVN and NHPC.

High concentration of renewable energy projects in a specific region (Gujarat and Rajasthan) may pose infrastructure challenges, particularly for energy distribution and grid management. Effective management of energy distribution across the regions is crucial to ensure grid stability.

Green Finance

Context: The government is working to set up a National Green Financing Institution to support its net-zero target by 2070. Current finance flows for climate initiatives remain much lower than the desired levels.

Relevance of the topic:

Prelims: Green Finance; Green deposits; Green bonds.

Mains: Challenges to Green financing.

National Green Financing Institution (proposed)

The primary purpose of the institution will be to aggregate green capital from different sources and lower the cost of capital.
NITI Aayog is examining structuring mechanisms for operationalising a potential National Green Financing Institution, including a bank modelled on NaBFID/NABARD, repurposing existing institutions like IREDA; Climate Fund in GIFT city, Green InvIT, etc. (non-exhaustive) along with analysing best practices from Green Banks around the world.

India’s Climate Commitments and need for Green Finance

As part of its climate commitments or Nationally Determined Contributions (NDCs) submitted to the United Nations Framework Convention on Climate Change (UNFCCC) in 2022:
- India aims to reduce its GDP emission intensity by 45% by 2030, compared to 2005 levels.
- India aims to achieve 50% of its installed electric power capacity from non-fossil fuel sources by 2030.
India has set a target to achieve at least 500 GW (gigawatts) of non-fossil power capacity by 2030, up from its current 165 GW (2024).
India has also pledged to create an additional carbon sink of 2.5 to 3 billion tonnes through additional forest and tree cover by 2030.
India has the aim to achieve the target of net zero emissions by 2070.
Preliminary estimates conducted for the Paris Agreement suggest that at least US$ 2.5 trillion (at 2014-15 prices) will be required for meeting its climate change actions between 2015 and 2030 (Government of India, 2015). The financial sector can play a pivotal role in mobilising resources and their allocation in green activities/projects.

Challenges to Green financing:

Lack of clear definition: There is no clear-cut definition for “Green Finance” in India. Various terms such as Climate finance, sustainable finance is used interchangeably with green finance. It led to misunderstanding among stakeholders and made it problematic to keep track of capital invested in green sectors.
Green Washing: Greenwashing is the practice of channelling proceeds from green finance towards projects that have negligible environmental benefits and providing misleading information to the investors and public about the environmental impacts of the company. Such practises discourage green financing.
Failure to internalize externalities: Infrastructure investments in India didn’t efficiently internalise the environmental externalities (Positive externalities are benefits arisen to third parties due to green investments and negative externalities are damages inflicted on third parties due to polluting investments). This resulted in insufficient capitalization of “green” projects and excessive investment in “brown” projects.
Maturity mismatches: Generally green projects require long-term financing with low returns in the initial years. This results in mismatch between long-term green investment and relatively short-term interests of investors.
Information asymmetry: Lack of information on commercial viability of green technologies and uncertain policies on green investments resulted in risk aversion by investors in projects of renewable energies.

Government’s Steps:

Sovereign green bonds:
- Sovereign green bonds are fixed interest-bearing financial instruments issued by any sovereign entity / inter-governmental organisation /corporation. The proceeds of these bonds are used only for environmentally conscious, climate-resilient projects.
- The Reserve Bank of India (RBI) recently auctioned its maiden sovereign green bonds worth ₹8,000 crore under its Sovereign green bond framework.
- There is no cap on foreign investment in these bonds because these instruments are considered as specified securities under the fully accessible route.

Green deposits: With a view to fostering and developing green finance ecosystem in the country further, RBI has put in place a Framework for acceptance of Green Deposits by the banks.

What are Green Deposits?

A green deposit is a fixed-term deposit for investors looking to invest their surplus cash reserves in environmentally friendly projects. Green bonds used to be the most common fixed-income ESG product in India earlier, and now products like green deposits are gaining significance.
Corporates looking for inclusion of a sustainability agenda into their treasury activities or those that have limited opportunities for investment in environmentally beneficial projects can invest in these green deposits.

Purpose of the framework:

To encourage banks to offer green deposits to customers, protect interest of the depositors, aid customers to achieve their sustainability agenda, address greenwashing concerns and help augment the flow of credit to green activities/projects.

Key Guidelines:

Applicability: The provisions of these instructions shall be applicable to Scheduled commercial banks (excluding payment banks, RRBs), deposit taking NBFCs and Housing finance companies (HFCs)
The Banks shall issue green deposits as cumulative/non-cumulative deposits. On maturity, the green deposits would be renewed or withdrawn at the option of the depositor. The green deposits shall be denominated in Indian Rupees only.
The eligible banks shall put in place a comprehensive Board-approved policy on green deposits covering all aspects in detail for the issuance and allocation of green deposits.
Allocation of funds: The proceeds raised form the green deposits shall be allocated to the following activities

Renewable energy
Energy efficiency
Clean transportation
Climate change adaptation
Pollution control
Sustainable management of natural resources and waste management

Projects involving nuclear power generation, generating energy from biomass and hydropower plants larger than 25MW are excluded from eligible projects.

The banks shall ensure that the funds raised through green deposits are allocated to the eligible green activities/projects.

Third party verification: Allocation of funds raised through green deposits shall be subject to an independent Third-Party Verification/Assurance which shall be done on an annual basis. The third-party assessment would not absolve the bank of its responsibility regarding the end-use of funds.

A review report shall be published by the banks covering the details about amount raised under green deposits, amount of funding to the eligible green projects and third-party verification report.

DISCOMs: Challenges and Reforms

Context: 2024 has been seminal for the power sector with the country meeting an unprecedented peak demand of 250 GW in a year. India also added around 30 GW of installed capacity in the last 12 months, three-fourths of which came from renewable energy (RE). However, debt sustainability of DISCOMs is the biggest challenge faced by the power sector.

Relevance of the Topic: Mains: Challenges faced by DISCOMs & Way Forward.

Background:

The International Energy Agency (IEA) expects India’s power demand to grow at 4% annually till 2050. A robust power sector rests on a vibrant DISCOM ecosystem.
Distribution Companies (DISCOMs) act as the link between power producers and consumers, ensuring electricity distribution across the nation.

Challenges faced by the DISCOMs

Higher AT&C losses (22%) on the account of transmission losses, commercial losses due to power theft, absence of metering, inefficiencies in bill collection. Global Average for AT&C losses is much lower at 8%.
Higher Cost of Power Procurement: Power procurement accounts for about 70% of costs incurred by DISCOMs. DISCOMs have entered into expensive and long-term thermal Power Purchase Agreements (PPAs). Also, delays and cost overruns in some projects have increased capital costs.
Debt Unsustainability: The outstanding debt of Discoms stands at ₹7.14 lakh crore as of March 2023 and is likely to increase, as Discoms continue to grapple with ACS-ARR gap (The gap between Average Cost of Supply and the Average Revenue Realised).
Lack of Autonomy: Political interference in fixing tariffs leading to lower tariffs on electricity. DISCOMS end up supplying electricity to households and the agriculture sector at subsidised prices leading to higher losses.
Higher dependence on State Governments: DISCOMs depend on state governments for subsidies. Delays in receiving subsidy reimbursements from the government add to liquidity stresses of DISCOMs.
Monopolisation: Presently, DISCOMs enjoy monopoly in distribution of electricity leading to absence of competition, higher inefficiencies and poor service-delivery.
Slow pace of Transmission Infrastructure: Of the 1,14,687 circuit km of (ckm) transmission lines and 776 GVA (Gigavolt-Ampere) substations to be added between April 2022-March 2027, just 28% and 20%, respectively, have been commissioned as of October 2024.

Distribution Sector Reforms

UDAY Scheme: Aims at improving the financial position of DISCOMs. Under the scheme, states are supposed to take over 75% of the discoms’ debt and the DISCOMs were required to reduce AT&C losses to 15%.
Revamped Distribution Sector Scheme (RDSS):
- RDSS has an outlay of Rs 3,03,758 crores over five years (2021-22 to 2025-26), with an estimated government budgetary support (GBS) of Rs 976.31 billion.
- Aim: To reduce AT&C losses on a pan-India level to 12-15% by 2024-25; reduce the average cost of supply-average revenue realised gap on a pan-India level to zero by 2024-25; and improve the quality, reliability and affordability of power supply to end-consumers.
- RDSS focuses on providing financial support for smart metering systems, distribution infrastructure upgrades, training, capacity building etc.
Financial Support: A total of Rs. 1.4 lakh crores was provided to DISCOMs in 2022–23 by the central and state agencies.
Private Participation and Competition in Distribution: Some of the states have promoted private participation in the DISCOMs through (a) Franchise Model and (b) Privatisation of DISCOMs.
- Under the Franchise model, the private entity has no ownership over the distribution grid assets. The private party manages billing and revenue collection. Example: Bhiwandi, Maharashtra.
- In case of privatisation, the private entity not only manages the billing and revenue collection but also owns the distribution grid. Example: Privatisation of Delhi Vidyut Board in 2002.

Way Forward

Tariff Reform and Direct Subsidy Transfer: Restructuring tariffs to reflect true cost of electricity generation and distribution is essential to ensure financial viability for DISCOMs. Direct transfer of tariff subsidies to beneficiaries may reduce undue financial burden on DISCOMs.
Autonomous Regulatory Bodies: Ensuring independence of regulatory bodies is crucial for effective tariff-regulation. Regulatory bodies should have authority to set tariffs based on actual costs and demand to encourage DISCOMs to operate efficiently.
Private Participation: Introducing competition among DISCOMs by allowing multiple-players to operate in a region can improve efficiency and bring in much-needed investment, innovation and management expertise.
Smart grid and metering can enable real-time monitoring of electricity usage, efficient load management, thereby, reducing transmission and distribution losses. It would also help in Peer-to-Peer energy trading and help utilities and consumers in efficient power utilisation.
Flexible PPAs: Electricity Regulatory Commissions should allow DISCOMs to make flexible, cost-effective procurement instead of continued lock-in under rigid and longer PPAs.

Hence, addressing the challenges faced by DISCOMs is imperative to ensure sustainability and efficiency of India's power distribution system.

Oilfields (Regulation and Development) Amendment Bill 2024

Context: Rajya Sabha has passed the Oilfields (Regulation and Development) Amendment Bill, 2024. The Bill amends the Oilfields (Regulation and Development) Act, of 1948.

Relevance of the Topic: Prelims- Oil fields (Regulation and Development) [Once it becomes an Act]

About Oilfields (Regulation and Development) Amendment Bill, 2024:

Aim: To ensure policy stability for oil and gas producers and allow international arbitration.

Key Highlights of the Bill:

1. Definition of Mineral Oils expanded:

The Oilfields (Regulation and Development) Act, 1948, defined only two mineral oils - petroleum and natural gas.
The Bill expands the definition to include:
1. any naturally occurring hydrocarbon
2. coal bed methane
3. shale gas/ shale oil and gas hydrates.
It clarifies that mineral oils will not include coal, lignite or helium.

2. Introduction of petroleum lease:

The Bill alters the previously used mining lease to introduce a ‘petroleum lease’ which allows companies to explore, prospect (assessment of potential petroleum accumulations across large areas), produce, make merchantable, and dispose of mineral oils. Existing mining leases granted under the Act will continue to be valid.
The Bill urges oil companies to use oilfields for other purposes like hydrogen production, carbon capture utilisation and storage or coal gasification.

3. Expands regulatory powers of Central Government:

Under the Act, the Centre is empowered to regulate the grant, terms and conditions, and time period of leases, production, storage and conservation of mineral oils and collecting royalties, fees and taxes for mineral oils.
This Bill expands the Centre’s powers to include framing rules for lessees to reduce emissions, sharing of oil production and processing units, merger of leases and resolving disputes on leases.

4. Decriminalisation of offences:

The Bill decriminalises offences related to the petroleum activities (such as invalid leases and non-payment of royalties etc.); however, it increases the monetary fine for violation of Rules from Rs. 1000 to Rs 25 lakhs.
Adjudication of penalties:
- The central government will appoint an officer of the rank of Joint Secretary or above for adjudication of penalties.
- Appeals against the decisions of the Adjudicating Authority will lie before the Appellate Tribunal specified in the Petroleum and Natural Gas Board Regulatory Board Act, 2006.

5. Opening up no-go areas to oil exploration:

The Centre has allowed oil exploration within previously defined no-go areas, such as those near missile testing sites.

Need for the Amendment:

India needs to increase its domestic production and reduce its import dependence to meet the country’s rapidly growing energy demand.
Imports have largely remained unchanged in spite of policy measures aimed at boosting domestic production— such as the Hydrocarbon Exploration and Licensing Policy (HELP), the Discovered Small Fields (DSF) policy, gas pricing reforms, and reduced royalty rates for deepwater, ultra-deepwater, and high-pressure/ high-temperature areas.
India is believed to hold yet-to-find potential of 13 billion tons of oil equivalent. Currently, the petroleum industry is burdened by delays in obtaining environmental and forest clearances, complexities in land acquisition, absence of comprehensive standards, procedures, and guidelines for operational and safety compliance.

Significance of Amendment:

The broader definition (of mineral oils) enables the efficient exploration, development, and production of both conventional and unconventional hydrocarbon resources without any policy confusion.
The regulatory changes (such as separation of leases) seek to simplify and streamline the regulatory environment, for the petroleum and energy sectors in India, by eliminating redundant or irrelevant approvals.
By shifting from criminal penalties to administrative fines for minor infractions, companies can focus on compliance and operational improvements without the fear of severe legal consequences. This will foster a more predictable environment, encourage innovation, and streamline the regulatory process.
The ‘zero interference’ promise by the government to the private sector would enhance India’s domestic output and cut down its reliance on oil imports.

These reforms are designed to enhance exploration and production. Achieving a meaningful reduction in import dependency will require a sustained and significant growth in domestic production, particularly in oil, natural gas, and deployment of renewable energy.