National Clean Energy Fund : a review

The budget for 2017-18 projected an estimate of nearly 30,000 Cr being collected in the form of Clean Environment Cess and transferred to the National Clean Environment Fund. The National Clean Environment Fund (NCEF) was created in 2010 by introducing a clean energy cess of ₹ 50/tonne on coal produced or imported along the lines of ‘polluter pays’ principle. The cess was increased to ₹ 200/tonne in 2015 and doubled to ₹ 400/tonne in 2016. The overall objective of the NCEF is financing and promoting clean energy initiatives, ‘funding research and innovative projects in clean energy technologies’.

Has the NCEF achieved its objectives?

A brief released by the Govt. on the performance of NCEF in 2016 showed that out of nearly 55,000Cr (up to FY 17) collected since its inception only 50% was transferred to NCEF and a further 50% was used to finance projects. One of the reasons for poor performance could be due to the functioning of the NCEF which needs an Inter-Ministerial Group (IMG) to approve projects to be funded from the NCEF.

Source: Ministry of Finance, 2016

MNRE: The big gainer, but is it enough?

The Ministry for New and Renewable Energy (MNRE) seems to be the big gainer from the NCEF. Over 90% of the funds from the NCEF have been transferred to MNRE.

Source: CSE, 2017

The Renewable Energy (RE) capacity addition has nearly doubled in the last couple of years however, the funds to MNRE has not been proportionally increased.

Source: Budget 2017-18

The same was confirmed by the minister in the house.

Interestingly, R&D which was one of the core objectives of the NCEF has seen a reduced allocation in the last couple of years. Although the increased coal cess has been in the news on a positive note, the performance of the NCEF overall has been relatively poor. There is a need for better review and handling of the NCEF at the IMG level  if the objective of the NCEF has to be realized along with the RE targets and the commitments made at COP21.


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