SLIPPERY ROAD

India's clean energy drive faces a tricky patch of taxation; the elephant in the room is ₹7.5 trillion a year in revenues to the exchequer

- S DINAKAR

India's quest to get to net zero by 2070 faces its share of obstacles in the form of a slowdown in solar installations, a less than satisfactory electric vehicles scale-up, and a compulsion to build new coal generators, but the elephant in the room is a contribution of ₹7.5 trillion in revenues to the exchequer that the oil and gas business generates on an annual basis.

It is true that the path to net zero helps to gradually eliminate emissions and pollutants in a nation that was ranked along with Pakistan, Tajikistan and Burkina Faso as the five countries with the most polluted air in 2023 by IQAir, a Swiss air quality technology company that collects air sensor data. Delhi had the dubious distinction of having the worst air, with fossil fuel-powered transport a key culprit.

But the journey to clean India's air chips away at the tax edifice, assiduously built over the last few decades by successive governments, leaving less on the table for both federal and state administrations to fund capital spending and social budgets. The newer fuels, including compressed biogas, ethanol or electric, offer little to the government at the moment by way of revenues-rather, they are a drain on state finances.

"The impact on tax revenues will not be immediate but gradual and more in the long term," said Swarnendu Bhushan, co-head of research at brokerage Prabhudas Lilladher.

States' side of thestory