India: Modi’s Panchamrit of COP26 and its implication from an industrial perspective

published on 17 November 2021 | reading time approx. 3 minutes

During the 26th Conference of the Parties (“COP26”) India’s Prime Minister Narendra Modi hit the news with his commitment to be net zero by 2070. Whilst in India this commitment was taken as a big improvement and chance for the country, the west felt that this was not enough and too late. Nevertheless, the 5 essential commitments announced by Modi, the so called “Panchamrit” include a step-plan for a greener India. These plans are a massive opportunity for all sectors and for growth of the economy. This Article will give you an overview of the commitments made during the COP26 and the resulting implications for the industry and economy.

India's initiative to contribute to the fight against climate change has developed progressively and made a new jump with this year's COP26. Already now, India ranks the 5^th in the world with regard to installed renewable energy capacity and managed to increase the renewable energy installed capacity by 226 per cent in the past 5 years.¹ The previous announced target to install 175 GW of renewable energy by 2022 has been now extended by the 5 milestone commitments during COP26. This bears chances for the industry. Beyond the Panchamrit the Prime Minister Modi mentioned other relevant aspects, which are highlighted below.

The Panchamrit

The first and the second commitment of the Panchamrit have the intention to increase the non-fossil energy to 500 GW by 2030, but also at the same time to ensure that 50 per cent of the energy requirement comes from renewable energy. This shows the clear intention to shift to renewable energy on the long run and not meeting the new target of 500 GW non-fossil energy by other means, e.g. nuclear power. Currently the fossil energy dominates the market and renewable energy has so far only a share of 25,24 percent in the total installed generation capacity in the country.² The previous commitment of India was to create a renewable energy capacity of 450 GW by 2030.

Source: Ministry of Power in Report on Optimal Generation Mix, January 2020 and Ministry of Power

The third and the fourth commitment are regarding the carbon emission of India. India intends to reduce total of 1 billion tons of the total projected carbon emissions by 2030 and reduce the carbon intensity of the economy by less than 45 per cent until 2030. Currently India is the 3rd highest emitter of carbon in the world, however, per capita carbon emission is much lower than in other industrial countries.

The final and fifth commitment of India is to achieve the target of Net Zero by 2070.

These ambitious commitments are likely to transform the Indian economy in an unprecedented way. The idea of Net Zero will reflect in businesses and with that they will play a key role in achieving the commitments. A lot of companies in India have already declared their intention to become net zero and more and more companies start thinking green. Further, investors prefer transparency about environmental footprints and will examine the current as well as future carbon footprints of their partners. Therefore, companies should now jump on the train of a Net Zero India and restructure their businesses accordingly.

Other announcements

1. Greener Infrastructure

As of now, India is lacking when it comes to green infrastructure. Even though the Government of India made several attempts to promote green infrastructure, India is still in the stage of development. Already now few cities like Nagpur have shifted to green locals, such as the green bus and most big cities currently try to build new metro lines in order to make public transport more easily available. But still, India’s metropolitans are polluted as ever. To tackle the overall pollution due to infrastructure, Prime Minister Modi has announced that the railway system in India has set a target of making itself “Net Zero” by 2030 and to reduce emissions by 60 million tons annually. This trend will spread to other infrastructure areas as well. More incentives and programs are awaited in this sector.

2. Lifestyle for Environment (LIFE)

The Government of India realized that the only way to create a more sustainable and greener India, is to increase the awareness. A sustainable and greener life must become a “lifestyle”, so Modi said. Therefore, the Indian Government intends to roll out the campaign Lifestyle For Environment (“LIFE”), which set goals to reform sectors such as fishing, agriculture, wellness, packaging, housing, etc. This opens opportunities for sectors, which had difficulties to create a footprint in India until now, such as roof-top solar for residential buildings.

3. Funding

During his speech at the COP26 Prime Minister Modi mentioned, that it is expected that the developed countries provide climate finance of 1 Trillion US-$. However, he also clarified that the promises regarding climate finance so far were hollow. This means that Prime Minister Modi is aware, that in order to fulfil the 5 commitments, India can’t rely on the developed countries. This is in line with his general approach that India should finance itself via it’s “Make-in-India” and “Vocal-for-Local” program. Therefore, the Indian Government is constantly working on amendments and schemes in order to increase the “ease-of-doing” business, especially for foreign investors. This includes inter alia tax incentives for manufacturing entities, fast-track process for renewable projects and expansion of foreign direct investment.

Conclusion

Now is the best time for foreign companies and foreign investors to jump on the train to build a greener and more sustainable India, considering that the Indian Government will have to keep its commitments and therefore will further incentivize the renewable energy sector. In order to get the most out of the incentives granted by the Government of India, foreign investors should strategically plan their investments in India considering all legal, financial and tax related aspects.

¹ Ministry of New and Renewable Energy

² Ministry of New and Renewable Energy