Budget 2024: Energy sector awaits more focus on green fuels, reforms, renewables

As the Indian energy sector goes greener, it seeks higher budgetary support from the government, with renewed emphasis on cleaner fuels such as green hydrogen and natural gas.

The oil and gas industry is keenly anticipating reforms, particularly in city gas distribution (CGD), to bolster natural gas consumption. Simultaneously, the power sector hopes for measures that will further incentivise the adoption of renewable energy sources.

In 2023, the oil and gas sector faced volatility in international crude oil prices because of the raging geopolitical tensions, supply cuts, and escalating demand concerns. Crude prices fell from $80 a barrel because of subdued demand, and then rose to $90 when the oil cartel OPEC+ lowered supplies and Middle-East tension flared up, but ended the year below $80 due amid oversupply.

India reached an all-time high peak power demand of 240 GW in September 2023, surpassing the ministry’s predicted peak demand of 230 GW. The power ministry emphasised the need to add 80 GW of thermal coal-based power generation capacity in 2023, a significant increase from the current 27 GW under construction.

India has committed to achieving 500 GW of renewable energy (RE) capacity by 2030 as part of its Paris accord commitment. Progress has been notable, surpassing 170 GW in 2023. However, there is a need for additional efforts to accelerate the growth trajectory.

What to expect from the Budget

The oil and gas sector anticipates the finance minister to allocate expenses towards enhancing the green and sustainable energy sector. Oil PSUs are actively pursuing net-zero targets and investing significantly in renewable energy sources. In the previous budget, Sitharaman had allocated Rs 30,000 crore for capital investments in the energy transition for state-owned oil marketing companies (OMCs), but the funds have not been allocated to OMCs yet.

Analysts further anticipate increased capital expenditure for renewable energy and measures to enhance hydrogen competitiveness, leading to more job opportunities and diversification within the solar and wind energy sectors. Budget plans are expected to promote indigenous development, facilitate technology transfer, and incentivise local manufacturing initiatives to conserve foreign exchange. Key expectations include proactive measures in incentives to boost manufacturing and R&D hubs, along with a reduction in GST rates.

According to CareEdge, the renewable energy sector seeks financial support for offshore wind projects. The firms in this sector also eye lesser basic customs duty on solar cells, and seek reduced duties on electrolysers and battery components. The thermal energy sector calls for increased investments in rail infrastructure and operationalisation of commercial mines.

Stocks to watch

Renewable energy stocks experienced a stellar performance in 2023, delivering returns ranging from 100-270 percent. Companies like REC, PFC, and Waaree Renewables achieved over 250 percent returns, while Gensol registered a 100 percent return during the year.

Stocks of Adani Green Energy, SJVN, NHPC, Suzlon Energy Ltd, Tata Power Co Ltd, Gensol Power, Adani Power, KPI Green Energy, JSW Energy and Inox Wind are expected to be in focus leading up to the budget.

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