What does the 2021 Union Budget do to improve air quality?
This year’s budget comes in the shadow of the COVID-19 pandemic and the many disruptions it has wreaked on society, and the economy. One expectation from the budget was an emphasis on public health and alleviation of the major risk factors. In 2019, air pollution was responsible for over 16.7 lakh deaths in India, more than ten times the lives lost due to the COVID-19 pandemic so far. The Global Burden of Disease assessments have shown air pollution is the second largest public health risk factor in the country, after malnutrition. Given this, did the budget address clean air adequately?
India’s air pollution crisis is a ‘wicked problem’ that is deeply embedded in a bewildering range of sectors and governance issues. Air quality management (AQM) spans measures such as industrial emissions control, improved waste management, better public transport and cleaner fuels for household cooking. Budgetary allocations of interest, therefore, include both funds earmarked for AQM like the 15th Finance Commission (FC) grants and the National Clean Air Programme (NCAP), and those addressing sectoral needs that also improve air quality.
In this article, we assess the Union Budget against five budget-related expectations on necessary resources for air quality management. These span allocations to three key umbrella initiatives for AQM, and two sectoral policies requiring significant budgetary outlay.
In brief, the budget offers a mixed bag, as outlined below.
Verdict: Step forward. The 15th FC report recommends providing these grants annually over 2021-26 to 42 urban agglomerations with million-plus populations. However, annual outlays have been reduced, with Rs. 2,217 crore allocated for 2021-22. In and of itself, this is not a cause for concern, and these funds need to be effectively utilized. These grants are an important milestone in mainstreaming AQM in municipal governance.
Verdict: Status quo. NCAP funds have only been incrementally increased (from Rs. 460 crore last year to Rs. 470 crore for ‘Control of Pollution’). The MoEFCC’s demand for grants itself last year was Rs. 660 crores. 15th FC grants are only complimentary in nature. NCAP remains the only AQM-specific funds for 90 of the 124 non-attainment cities, and for state line departments in the 42 million-plus cities receiving FC grants.
Verdict: Status quo. CAQM allocated Rs. 20 crores. The CAQM was created by Ordinance in October 2020 to coordinate AQM in the national capital region, and has a mandate that includes monitoring, regulation, research and planning. Central Pollution Control Board outlay remains unchanged at Rs. 100 crore.
Verdict: Status quo / step backward. Ujjwala has been extended to 1 crore more households, but outlay for LPG subsidies was slashed to a third of last year’s outlay. Ujjwala benefits might be limited or perhaps even lost if LPG becomes even less affordable to poor households that rely on solid fuels.
Verdict: Step forward. Multiple promising announcements were in the budget on vehicles, but the details awaited: new scheme for public buses (Rs. 18,000 crore), vehicle scrapping policy announced, Fame II subsidy increased.
We expand on these in the rest of the article.
Budget expectation 1: Sustain the 15th Finance Commission grants linked to air quality till 2026
Background:
In its interim report for 2020-21, the 15th FC had recommended performance-based grants for 42 urban agglomerations with populations exceeding one million. (The FC is a constitutionally mandated body that recommends the sharing of taxes between the union and state governments.) Accepting these recommendations, the Union Finance Minister introduced these grants with an allocation of Rs 4,400 crore in last year’s budget.
The allocation was substantial, exceeding the entire budget of the Ministry of Environment, Forests and Climate Change (MoEFCC). It also marked the mainstreaming of air quality outcomes in municipal governance. However, a one-off grant will not have had much of an impact. Improvements in air quality need sustained efforts, over at least a decade, and it is essential for these grants to be sustained over the five-year tenure (2021-2026) of the 15th FC report.
Budget outcomes:
In the budget speech, the finance minister announced Rs 2,217 crore to the 42 UAs “to tackle the burgeoning problem of air pollution”. The allocation was consistent with the recommendations of the 15th FC report for 2021-2026. Furthermore, for 2021-22, the 15th FC has prescribed indicators measuring improvements in air quality directly and those tracking intermediate outputs like monitoring networks, source attribution studies and progress on action plans.
Importantly, the 15th FC recommends these annual grants for the next five years, with the outlay increasing year-on-year, up to Rs 2,621 crore in 2025-2026. These grants therefore provide a predictable and significant source of funds in the medium term to ULBs, explicitly tied to demonstrable improvements in air quality. So the grants represent an important step forward for mainstreaming air quality in municipal governance.
The total grant amount has been reduced by nearly half in this year’s budget compared to the previous year, without a clear justification from the 15th FC. This said, since their introduction last year, the potential and the limitations of these grants have also become clearer. Several measures to tackle industrial and vehicular emissions, for example, fall under other agencies that can’t use these grants.
In 2020-21, the grant was to be released in two tranches to the urban local bodies (ULBs): 50% unconditional upfront and the rest based on performance in the last quarter. After much delay, the government released the first tranche of Rs 2,200 crore in November 2020. This amount may not be spent fully since the ULBs were underprepared to absorb these funds. Therefore, in and of itself, the reduction in the budget is not a big cause for concern.
Budget expectation 2: Substantially increase funds for the National Clean Air Programme
Background:
The National Clean Air Programme (NCAP) was launched in January 2019. While the NCAP document covers a wide range of policies, it has been primarily operationalised through city action plans. The list of non-attainment cities — those identified as having pollution levels worse than the national air quality standards — has grown from 102 at the launch of the programme to 124 now.
The 15th FC grants complement the NCAP: only ULBs can utilise them, and they are only meant for million-plus cities. NCAP remains the only route for financial support to 90 of the 124 non-attainment cities. In fact, even for the million-plus cities receiving FC grants, NCAP remains the only route for AQM-specific funds from the Centre to key state government agencies, such as the state pollution control boards and the transport departments.
The programme has arguably been underfunded so far. In the first year of NCAP (2019-2020), the government distributed Rs 300 crore among 102 cities, with the largest cities receiving Rs 10 crore each, and those like Guwahati getting only Rs 20 lakh. Installing just one air-quality monitor costs Rs 1.2 crore.
Budget outcomes:
There is no marked increase for NCAP this budget. Allocations for “Control of Pollution” have increased slightly, from Rs 460 crore last year to Rs 470 crore this year. The environment ministry itself had projected a need for Rs 660 crore under this line item for 2020-2021.
Worryingly, against the already modest allocation of Rs 460 crore for ‘Control of Pollution’, the revised estimates for 2020-21 are down to Rs 280 crore, suggesting a significant reduction in the environment ministry’s spending on NCAP this year.
Budget expectation 3: Provide adequate funding and resources for the new Commission on Air Quality Management
Background:
The new Commission on Air Quality Management in the National Capital Region and Adjoining Areas (CAQM) is a significant milestone – even if the ordinance that created it had major limitations. The CAQM has been set up with the explicit objective of institutionalising an ‘airshed-level’ approach in the region. The CAQM is expected to coordinate and synergise AQM efforts between the state governments under its jurisdiction.
CAQM’s mandate includes three broad areas. One, the CAQM can carry out air quality monitoring, periodic source apportionment studies, and undertake field inspections. Two, in its role as an enforcement agency, the CAQM may initiate criminal prosecution and may take up matters suo moto or on the basis of complaints by individuals or organisations. Three, in its role as a research body, the CAQM is also responsible for planning. To do all these, a dedicated team of scientists and experts would be crucial.
There has been limited information on its functioning thus far, and Budget 2021 was expected to provide greater clarity on the scale of its functioning.
Budget outcomes:
The government has allocated Rs 20 crore for the CAQM this year. Fund adequacy is hard to judge at this stage since the plan for CAQM’s functions remains opaque. The Central Pollution Control Board’s budget has remained unchanged for the last three years, at Rs 100 crore.
While it is hard to make apples-to-apples comparisons with other countries, the gulf between these numbers and resources allocated elsewhere make for sober reading. The South Coast Air Quality Management District in California had a proposed budget of USD 173 million (about Rs. 1,260 crores) for 2020-21, with staffing alone accounting for USD 141 million. Similarly, consider the Hebei province in China, part of the Beijing-Tianjin-Hebei national capital region, and with a population of about 7.2 crores (2010) compared to NCR’s 4.6 crores (2011). In 2016, Hebei had USD 843 million (over Rs. 6,100 crores) of government funds committed for implementing its air pollution control plan, drawn from the central government, its neighboring provinces, and its own resources.
Budget expectation 4: Increase LPG subsidies to poor households
Background:
Households burning solid fuels for cooking and heating form the single largest source of outdoor air pollution exposure in India, in addition to high exposure indoors. Women and infants, are disproportionately affected. The Pradhan Mantri Ujjwala Yojana (PMUY) was an important effort at providing access to LPG to over eight crore households. In January 2020, LPG coverage had reached 96.9% across India. However, the subsequent use of LPG across rural households in India remains limited. Limitations in affordability, accessibility, and awareness result in widespread ‘fuel stacking’ i.e., the continued use of biomass along with LPG.
Since May 2020, LPG subsidies have essentially been discontinued – although the government provided three free LPG cylinders to Ujjwala beneficiaries, as part of the relief package. With a near universal LPG coverage, the budget was an opportunity to rebuild the subsidies’ framework to encourage LPG as a primary fuel. Different proposals exist for designing income-based differential subsidies. The government could also build on the relief package, and provide free or highly subsidised LPG up to at least five cylinders (meeting about 50% of the average cooking needs) for poor households, perhaps starting with Ujjwala beneficiaries.
Budget outcomes:
The finance minister announced that the government would extend the Ujjwala programme to another one crore beneficiaries. This should help improve air quality in the long term. However, the allocation for LPG subsidies has been slashed from Rs 35,605 crore last year to just Rs 12,480 crore. The Centre has thus missed an opportunity to revamp LPG subsidies and increase support for poor households – a policy that could have addressed air pollution exposure and doubled up as social protection as well.
Budget expectation 5: Provide incentives to accelerate transition towards a cleaner vehicular fleet
Background:
Transport emissions play an important role in cities: emissions from transport account for 20 to 30 percent of PM2.5 concentrations in Delhi, and for an average of 18 percent across 20 other major cities in India. Mitigating transport emissions require a range of strategies to transition to a cleaner fleet, reduce emissions from on-road vehicles, and limiting the use of private vehicles.
Widespread adoption of electric vehicles (EVs) could offer significant benefits to local air quality, particularly in Indian cities. By using electrical energy stored in on-board batteries, EVs eliminate tailpipe emissions entirely. Of course, given the persistent noncompliance to the power plant emission norms, EVs could also lead to exporting pollution to regions surrounding coal power plants.
To boost EV adoption in India, the 2019 Union Budget offered an additional tax benefit of Rs. 1.5 lakhs on the interest paid on loans taken for EV purchases, and paved the way for the reduction of GST on EVs to 5 percent. These incentives complemented the EV purchase subsidies available under the Phase II of the FAME India Scheme, and the benefits available under several state level EV policies. While the last Union Budget did little to promote electric mobility in the country, encouraging EV adoption and production remains a priority for the government. Union Minister Nitin Gadkari has set the goal to become a global leader in EV manufacturing by 2025.
Gadkari has also long signaled that a national vehicle scrappage policy is around the corner. The scrappage policy provides an opportunity to replace old and polluting internal combustion engine-based (ICE) vehicles with newer ICE vehicles compliant with the BS VI fuel standard, and also with EVs. The Delhi EV Policy already lays out incentives for EV adoption through the scrapping of old vehicles. Replacing old trucks, in particular, could have significant consequences on pollution.
Budget outcomes:
Budget allocation for the FAME II subsidy scheme for EVs has increased from Rs. 692.94 crores in FY21 to Rs. 756.66 crores in FY22. Note, however, that the revised estimates for FY21 have fallen to Rs. 318.36 crores.
The Finance Minister also announced a voluntary vehicle scrapping policy, and details have started trickling in; the policy is reportedly going to be finalised this month. Further, 18,000 crores have been allocated for a new scheme to augment public bus transport services. It will partially be used for procuring 20,000 buses.
In summary, the budget offers a mixed bag for air quality. The 15th FC grants have been sustained while the NCAP budget remains low. Similarly, while there are significant steps to tackle vehicular emissions, the cutback on LPG subsidies may limit the gains from PMUY.
(Sections of this were published in the Wire Science article What does the 2021 Union Budget Do To Improve Air Quality? on February 6, 2021.)
Environmentality is a collection of ideas, perspectives, and commentary by researchers at the Initiative on Climate, Energy and Environment, Centre for Policy Research, New Delhi. Views and opinions expressed in this blog are solely those of the authors. They do not represent institutional views.
In this piece, we unpack the Union Budget 2022, focusing on its implications for the current air quality regulatory framework and whether it gives impetus to new and ongoing interventions through adequate financial support. We find that the budget does little to improve air quality management in India.