Indian Express Editorial Summary

Editorial Topic : Hurdles on path to green

GS-3 Mains Exam : Energy

Revision Notes

The scorching reality of climate change, with 2023 confirmed as the hottest year on record, intensifies scrutiny on major carbon-emitting sectors. As the world’s third-largest emitter, India faces significant challenges in transitioning to a cleaner future.

Government Initiatives:

• Production Linked Incentive (PLI) Scheme: This scheme incentivizes domestic manufacturing of solar modules, a crucial component for solar power generation.
• Viability Gap Funding: Provides financial assistance to make offshore wind and battery storage projects more commercially viable, promoting renewable energy sources with grid integration capabilities.
• FAME (Faster Adoption and Manufacturing of Electric Vehicles) Scheme: Aims to promote electric vehicles by offering subsidies for purchase and setting up charging infrastructure.
• National Green Hydrogen Mission: Focuses on developing green hydrogen, a clean fuel source, for sectors like refining, chemicals, fertilizers, and transportation.
• Energy Conservation Bill Amendments: Enhance energy efficiency standards for industries, promoting responsible resource consumption.
• Green Bonds: These financial instruments raise capital specifically for environmentally friendly projects.

Voluntary Steps and Risks:

• While some entities are proactively adopting greener technologies, several challenges persist.
• Transition Risks: The shift to a cleaner future involves various risks, including:
  • Policy and Regulatory: Uncertainty in government policies and regulations can hinder investments in green technologies.
  • Technology: Technological advancements in clean energy solutions are crucial, and delays can impede progress.
  • Market: Unstable markets for clean energy products can discourage investments.
  • Reputation: Companies with high carbon footprints may face reputational damage from consumers and investors.
  • Legal: Stringent environmental regulations and potential lawsuits can pose challenges.
  • Technological Risk: Among these risks, ensuring reliable and affordable clean energy technology is the most immediate concern.

Renewable Energy Targets and Investments:

• Fossil fuel power plants are a major source of carbon emissions in India.
• The government aims for an ambitious target of 50% non-fossil fuel power by 2030.
• ICRA, a rating agency, projects India can achieve this goal, with the share of non-fossil fuel-based power generation capacity rising significantly by 2029-30.
• However, achieving this target necessitates substantial investments:
  • ₹11-12 lakh crore in renewable energy generation capacity.
  • ₹5-6 lakh crore in power transmission and storage infrastructure.

Ensuring Round-the-Clock Renewable Energy Supply:

• To meet clean energy targets, ensuring a continuous and reliable supply of renewable energy is critical.
• This can be achieved through:
  • Hybrid RE projects: Combining wind and solar energy projects with energy storage systems like batteries can provide a more stable and consistent power supply.
  • Carbon Sequestration: Capturing and storing carbon emissions from hard-to-abate sectors like steel and cement production can help mitigate their environmental impact.

Challenges for Cement and Steel Industries:

• Cement:
  • Producing one tonne of cement releases an equivalent amount of carbon dioxide.
  • The industry is highly resource and energy-intensive, contributing significantly to CO2 emissions.
  • Carbon Capture, Utilization, and Storage (CCUS): This technology captures carbon emissions and stores them permanently underground. It is considered a crucial solution for the cement industry.
  • Niti Aayog estimates a CCUS capacity of 2 million tonnes per annum by 2030 is needed.
  • High capital cost (Rs 1,600-1,800 crore) is a major challenge for CCUS implementation.
• Steel:
  • Coal usage in steel production leads to high carbon emissions.
  • Domestic steelmakers are working towards reducing their carbon footprint by 25-30% by 2030.
  • Technological advancements are needed to achieve significant emission reductions.

National Green Hydrogen Mission:

• Green hydrogen, produced using renewable energy sources, is a clean fuel alternative for various sectors.
• The National Green Hydrogen Mission aims to develop green hydrogen for use in refining, chemicals, fertilizer production, and transportation.
• This mission faces a high capital expenditure of approximately Rs 8-9 lakh crore.
• Several Indian entities are launching pilot projects and planning green hydrogen/ammonia production facilities.

Conclusion

The conclusion emphasizes that achieving a clean energy future in India requires a two-pronged approach:

1. Voluntary action by industries: While some companies are taking initiative to reduce their carbon footprint, broader industry adoption of green technologies is necessary.
2. Crucial government support: Government policies and financial aid are essential for accelerating the clean energy transition, especially in hard-to-abate sectors like steel and cement. This support can take various forms:
   • Policy interventions: Implementing clear, stable, and long-term policies that incentivize clean energy investments and technologies.
   • Subsidies: Providing financial assistance to make clean technologies more affordable for industries.
   • Duty exemptions or tax benefits: Offering tax breaks or exemptions on duties related to clean technologies to encourage their adoption.

By combining proactive industry efforts with robust government support, India can overcome the hurdles on its path to a greener future.

 

Indian Express Editorial Summary

Editorial Topic : Ease of compliance

GS-3 Mains Exam : Economy

Revision Notes

 

While recent record-breaking GST collections are positive, the editorial argues that these numbers shouldn’t mask the ongoing difficulties associated with the daily application of the law.

One Nation, One Tax – A Dream Yet to be Fully Realized

The core idea behind GST – the merging of central and state indirect taxes – was to simplify the tax system and facilitate seamless crediting of tax paid on inputs across the supply chain. This aimed to eliminate the cascading effect of double taxation, a major burden for businesses previously.

Understanding the Problem: A Manufacturer’s Example

Let’s consider a manufacturer with a monthly tax liability of Rs 1,00,000. They might have paid Rs 60,000 in GST on their inputs. Ideally, they should only pay the remaining Rs 40,000 in cash. However, the problem arises when:

• The manufacturer has only Rs 10,000 in readily available cash.
• The current GST portal only accepts returns with full tax payment.
• Unpaid returns lead to a snowball effect as subsequent returns can’t be filed.

The Ticking Time Bomb: Input Tax Credit Deadline

• The deadline to claim input tax credit is November 30th of each year. Failing to pay the entire tax amount by this date means the manufacturer loses the Rs 60,000 input tax credit permanently.

The Impasse: Stuck Between a Rock and a Hard Place

The current system creates a catch-22 situation:

• The manufacturer has paid GST on inputs (Rs 60,000), but lacks the cash to pay the remaining Rs 30,000 due to delayed payments or other business challenges.
• Because of the shortfall, the manufacturer loses the entire input tax credit, leading to a tax liability of Rs 1,00,000 instead of Rs 40,000.

Urgent Need for GST Portal Adjustments

• Accepting Monthly Returns with Shortfalls: The portal should allow filing returns even if the full tax isn’t paid.
• Recording Tax Arrears: The portal needs to reflect the outstanding tax amount (Rs 30,000 in our example) and accrue interest until the dues are settled.
• Preserving Input Tax Credit: Allowing input tax credit claims despite the shortfall provides some relief to the manufacturer.

Payment Delays and the Plight of SMEs

• Delayed payments from government agencies that exceed the 45-day limit mandated by the Micro, Small and Medium Enterprises Development Act (2006). These delays create a cash flow crunch, making it difficult for SMEs to meet their tax obligations.

Seeking Fairness in Tax Liability

• Income tax is based on net income, which considers both sales and expenses.
• The current GST system unfairly penalizes businesses for delayed payments by denying input tax credit, even though the tax on purchased inputs has already been paid.

Recommendations for a More Equitable System

• The GST portal should accept all returns and record tax arrears with accruing interest.
• The deadline for clearing tax arrears can be set as November of each year, with stricter penalties for non-compliance.
• Instead of denying input tax credit, the system should levy interest and penalties for persistent defaulters.

Conclusion: A Call for Action

• The current system disproportionately affects SMEs and overlooks genuine business challenges beyond their control. Until the GST portal is modified to accept returns with shortfalls, enforcing the November 30th deadline for availing input tax credit should be suspended.
• By acknowledging these challenges and implementing the proposed solutions, the GST system can move closer to its intended goal of simplifying tax compliance and fostering a more equitable business environment.