Letter to Honorable Minister for Finance

Few suggestions on the proposed budget 2019-20

Shankar Sharma

Smt. Nirmala Sitharaman
Honorable Minister for Finance
Govt. of India, New Delhi

Copy with complements to:
The Honorable Prime Minister
Govt. of India, New Delhi  

Dated, 15th June 2019

Dear Smt. Nirmala Sitharaman,

 Subject: Few suggestions on the proposed budget 2019-20

Greetings from Sagar, Western Ghats, Karnataka.

Congratulations on assuming the office of the Minister for the important portfolio of Finance. I join thousands of power sector observers in wishing you the very best in your term.  May the country embark on sustainable developmental pathways under your leadership.

This has reference to the ministry’s call for suggestions from the public over the forthcoming budget. I join millions in the country in appreciating this initiative by your ministry to seek suggestions from the public.  This novel initiative, if implemented diligently, has the potential to make the budget highly effective one to make it relevant to our people’s needs in the short term and also strategically. The following are my feedback.

A.     Overarching principles:
Every budget states that the objective is to strive for the overall welfare of the country, but very few, if at all any since independence, can be said to meet the relevant objective.  Almost all of them seem to have gone to make only few sections of the country happy, but by putting all others into more than one kind of injustice.  It can be stated without any hesitation that every budget so far since independence, has directly/indirectly contributed to the accelerated degradation of the critical elements of the nature.   

Such degraded environment has pushed thousands of communities around the country to destitution because of the denial of access to forests, agricultural lands, grazing grounds, fresh water sources, fishing spots etc.  Since independence millions of hectares of forest and agricultural lands are reported to have been diverted for other purposes, which have also led to such denial of access. 

Such a scenario has been forced on the vulnerable sections our people because of certain kind of developmental paradigm where the high GDP growth year after year has been the focus since at the least last three decades.  A high growth year after year can lead to the multiplication of the size of our economy in financial terms as shown in the table below.  Whereas a compounded annual growth rate (CAGR) of 4% of GDP will take about 40 years to increase the size of our economy by 4 times, 10% CAGR of GDP will take only 18 years.
                                                          Time taken for the size of economy to get multiplied at constant CAGR

CAGR Growth Percentage

Increase by 100%

Increase by 200%

Increase by 300%

Increase by 400%

@ 4%

19  Years

29 Years

36 Years

40 Years

@ 6%

13 Years

20 Years

25 Years

29 Years

@ 8%

10 Years

15 Years

19 Years

22 Years

        @ 10%

8 Years

13 Years

16 Years

18 Years

It can be easily discerned that a sustained high GDP growth rate will mean the manufacture of products and provision of services at an unprecedented pace leading to: setting up of more factories/ manufacturing facilities; consumption of large quantities of raw materials such as iron, steel, cement, chemicals etc.; increasing an unsustainable demand for natural resources such as land, water, minerals, timber etc.; acute pressure on the Government to divert agricultural /forest lands; huge demand for various forms of energy (petroleum products, coal, electricity etc.); accelerated urban migration; clamor for more of airports, airlines, hotels, shopping malls, private vehicles, express highways etc.

Whereas this kind of high GDP growth rate paradigm has been claimed as leading to economic growth benefiting all sections of the society (through trickle-down effect), the net impact on the overall society because of the degraded natural resources is completely ignored.  The forcibly dispossessed people, most of who go without any sort of compensation for the forced displacement, can only become poorer than they were earlier.  The growth in number of slums in all our major cities is a shining example of this phenomenon.  It is estimated that many millions of people have been displaced in this manner since independence.

Vast increase in each of the economic activities in a high GDP growth rate paradigm, while degrading the bounty of the nature, and leading to increase in the total greenhouse gas (GHG, responsible for global warming) emissions, it will also add up to effectively reducing the overall ability of natural carbon sinks such as forests to absorb GHG emissions. There will also be increased pollution of land, air and water along with huge issues of managing the solid, liquid and gaseous wastes.

Such a scenario has led to very many health issues and the loss of productivity in agriculture, dairying, fishing etc.  It is to be noted that such economic losses are not accounted for in the overall GDP growth rate of the country.  The net result is that the nation’s effective GDP growth rate should be much less than the 6 - 8 % figures which are claimed by the authorities.  If we take all the negative issues to the larger society into objective consideration, the GDP growth rate may even be negative in many years.

In this context, may I draw your kind attention to a World Bank report of June 5, 2013, which has highlighted how the environment has suffered in India consequent to the previous decade of rapid economic growth?  The report with the title “Diagnostic Assessment of Select Environmental Challenges, Economic Growth and Environmental Sustainability: What Are the Trade-offs?”, has many revelations of critical importance to the future of our communities; provided our leaders take cognizance of it.  Two salient features of this report are: (i) although the past decade of rapid economic growth has brought many benefits to India, the environment has suffered, exposing the population to serious air and water pollution; (ii) the report finds that environmental degradation costs India $80 billion per year or 5.7% of its economy.  A subsequent report of the World Bank is reported to have estimated the cost to India’s economy because of the environmental degradation as 8.5% of its GDP.  
CO2 emissions cost India $210 billion every year: Study

World’s fastest growing economy has the world’s most toxic air  

US, China and India: Top carbon emitters to face the biggest economic losses

1/4th of power plants burning coal and cash, yet more in pipeline

As per Sir Nicholas Stern in ‘The Economics of Climate Change’, the Climate Change could have very serious impacts on growth and development. This Review has estimated that certain scenario of Global Warming may result in poor countries like India suffering economic costs of about 20% of its GDP, whereas the mitigation of the same now can be achieved at a cost of about 1% of present GDP.  The Review also indicates that more we delay in addressing the Global Warming the higher we will have to spend in mitigation of the same in future.  In this background adequate investment to minimise the Global Warming impacts from the conventional energy sources and continued destruction of natural forests is considered worth the huge cost.  If we deduct 8.5% of our GDP as cost to our society, the net GDP growth rate can only be negative by quite a margin if all the direct and indirect costs are also taken into objective account. 

There is clearly a need for the country to undertake a holistic review of the high GDP growth rate implications for the economy itself from the perspective of the overall welfare of our communities.

Many of the public investment in India, in the name of development, are in reality a great drain on our economy.  An example is the vast amount on NPAs in the power sector, which can be easily traced to the high GDP growth rate paradigm.
1/4th of power plants burning coal and cash, yet more in pipeline

B.      Environmental decay and health implications
Official statistics from the Ministry of Environment, Forests and Climate Change indicate that the crucial elements of the nature have degraded to a large extent consequent to the rapid growth in economic activities.  India finds itself at the bottom of the global environment performance index with a ranking of 177 out of 180 countries.  It does not require deep knowledge of environment and ecology to surmise that the good upkeep of various elements of the nature is critical for the overall welfare of humans.  Hence, the accelerated decay of our environment, year after year, must be a major concern not only for our policy makers but also to the common man.

India’s external affairs minister was reported as having said at the 73rd session of the UN General Assembly that India is willing to take lead in combating Climate Change. The hollowness of the conviction behind this statement can become evident when we remember that thirteen of the twenty most polluted cities are in India; that more than a million people are reported to be getting killed every year from air pollution issues; that most of the fresh water bodies are suffering from serious contamination; and increasing evidence of soil contamination is emerging. 

The forest and tree cover in the country has come down to about 20% of the land area as against the national forest policy target of 33% at the national level and 66% in hilly districts.   Similarly, large chunks of agricultural lands also have been lost.  There is probably no river in the country which is not polluted.  Many rivers are hardly reaching the oceans, and many have become seasonal as opposed to being perpetual at the time of independence.  Air pollution in our cities has become a joke on our cultural heritage.  Premature deaths due to polluted air, contaminated water and food are estimated as few millions every year.  A considerable percentage of our children are reported to have stunted growth due to such health issues.

Steep reduction in the forest cover, encroachment of and obstruction to the flow of rivers, and unmanageable growth of our urban areas have resulted in very hot atmospheric conditions, floods, rain related disasters, and unhealthy conditions. Air pollution in India is reported to be to more than 12 lakh death annually, for which the contribution of pollution and contamination from the power sector policies is estimated to be more than 50%.

No welfare oriented society can take pride in such a vast number of unfortunate losses of lives, which are all basically because of the frenetic set of economic activities without any effective checks and balances w.r.t to the pollution/contamination of air, water and soils.

Some of the media reports in this context are as below.
60% of world's wildlife has been wiped out since 1970's-wildlife-has-been-wiped-out-since-1970-700639.html

Air pollution linked to 12.4L deaths in India in ’17: Report
Clean energy may save 11 mn life-years in India: Study

India’s developmental considerations cannot and must not ignore such harsh realities of the true welfare of our communities w.r.t the proper upkeep of the environment.   The annual budget can positively influence these issues.  

C.      Climate Change considerations:
Whereas the Climate Change phenomenon has occupied the conscience of the planet since 1990s, it is being termed as Climate Emergency in 2019.  The associated issues have become so critical and urgent that IPCC has said that we have only time till 2030 to implement all the measures necessary to keep the global temp. rise below 1.50 C.

India is the third largest emitter of GHGs, but has no effective plan to reduce its total GHG emissions even by 2040, as clearly indicated in the draft national energy policy of 2017.  Instead, this policy draft clearly says that both the total GHG emissions as well as per capita GHG emissions will increase considerably by 2040.  Keeping in view the huge population base, projected increase by 2050, number of people below poverty line, unmet aspirations, high GDP growth rate policy of the successive governments, already stressed natural resources etc., India will not only be an enormous concern to the global community, but will also face horrendous consequences for its people.  In more than one sense the Climate Emergency, which is being referred to more frequently in recent months, applies very aptly to India.  There are emergencies of various kinds: emergency of air pollution, water scarcity emergency, noise level emergency etc. However, there is also a tremendous potential for the country not only to achieve all round development of each of our communities while vastly reducing the total GHG emissions, but also to contribute effectively to reduce the global threat of Climate Change because of many geographical and heritage factors such as good quality tropical forests and simple life styles.  To enable these effects, clear, rational and effective policy interventions through budgetary exercise have become imminent.

Some of the associated media reports, as below, should highlight these concerns.
World must triple efforts or face catastrophic climate change, says UN

India proposes more than $12 billion of pollution-reducing incentives

World must triple efforts or face catastrophic climate change, says UN

Stop biodiversity loss or we could face our own extinction, warns UN

'Take Action Or You Will Be Seen As A Villain': Teen Climate Activist Greta Thunberg Tells Modi

Donald Trump blames India, China, Russia for not doing enough on climate change, says US has 'cleanest air'

The UN’s top climate and biodiversity institutions and scientists have found that nature-based solutions – such as forest protection, tree planting, land restoration and soil management – could provide up to a third of the carbon absorption needed to keep global warming within the Paris agreement parameters.

Because of various factors, such as large population and geographical constraints, India is being projected as one of the most impacted countries in the coming years from the ravages of Climate Change.  Hence, the critical need to care for our limited natural resources can be continued to be ignored only at our own peril.

The annual budget provisions of one of the largest economic of the planet cannot afford to ignore such short term and strategic implications of our economic paradigm.  

D.     Export/Import implications:
The successive governments have been according a high priority to various issues associated with the import/export without having a diligent analysis of the same on our communities.

Whereas the large volumes of import have the implications of the burden of foreign exchange outgo, the export of manufactured goods also has many implications to our communities from the ecological perspective alone.  The much focused policy focus ‘make in India’ should be seriously reviewed in this context.  Assuming that India will be able to meet about 25% of the global demand for certain manufactured items, the implications to our communities will be enormous because of the vastly increased demand for land, water, energy, raw materials, as well as generating massive quantities of wastes/pollutants/contaminants while contributing to much higher levels of total GHG emissions. 

The examples of steel and cement as manufactured goods, and sugar as processed food product as export items can be highlighted in this regard.  Steel and cement require a lot of raw materials, water and energy while producing a lot of pollutants. Similarly, the production of sugar requires a lot of water to grow sugar cane and to process the same to sugar.  India being a severely water deficit country, and struggling with the ever increasing demand for energy can ill afford such additional demands just for the same of export dollars. Export of such items shall basically means that India exports massive quantities of water indirectly, while its own people face perpetual water crises.

Over dependence on imported technology, such as in the preference for a large number of imported nuclear reactors, have implications both for foreign exchange outgo as well as self sufficiency.  Vast amounts of spending on elite projects such as bullet trains, and the space missions and India’s own space station etc.  by ISRO, will be considered as highly inappropriate by it’s people, when we also consider that thousands of villages and millions of poor people in the country have no access to fresh water, toilets, health facilities, schools, electricity etc. while people in mountains and Western Ghats have no safe bridges to cross the rivers/rivulets in their villages.  Prioritisation on such widespread usage issues should be considered seriously as against sending space missions to Mars or moon, or on Neutrino Observatory project, or Bullet trains etc.

Hence, the priority for our country should be to meet the essential needs of our own people on a sustainable basis, without much dependence on export/import.  Only those items grown on a renewable basis and without much burden on our environment should be considered for export, while the import dependence must be minimized to the most essential items.  

E.      Sustainable economic/development paradigm for the country
Keeping all these issues in proper perspective, a sustainable economic paradigm for the country should become very clear.

Which Indian in his senses would want to be anti-development? The question, therefore, is about the very nature of development needed for our people, and what we mean by that term. Which of the following can be called a part of true development for the vulnerable sections of our society: (i) to cut down mountain ranges in the ecologically critical Western Ghats for putting up industrial plants or power plants or railway lines or power lines or dams or express highways?;  (ii) to take tribal lands away without giving the inhabitants either a say in the matter or meaningful rehabilitation plans?; (iii) polluting our rivers and air by industrial effluents or excess water discharge through agricultural runoff ?;  (iv) destroying our ecologically rich and green hills through unscientific mining practices?; (v) reducing the forest and tree cover to less than 20% as against the national forest policy target of 33%; (vi) compromising the integrity of rivers and fresh water bodies through over exploitation, interference and obstruction?.  Some or all of these have to be the consequences of frenetic economic activities to feed to the paradigm of a high GDP growth rate.  Our developmental pathway has to be reviewed in the context of such socio-ecological issues, and the stark fact that fifteen of the world’s most polluted twenty cities are in India, with New Delhi ranking as the most polluted city in the world (WHO report, 2014). 

Since the true objective of national level and state level policies and plans should be to ensure all-round welfare of all sections of our society and to protect effectively the vulnerable sections of our society from the ravages of the Global Warming, there cannot possibly be any compromise in the much needed paradigm shift in the development concept for our densely populated communities. Chronic issues such as clamor for materialism, unabated energy and water requirement, increasing demand for diversion of forest/agricultural lands, unending urban migration, pollution/contamination etc. cannot be ignored any longer, if we hope to see a decent chance for our vulnerable sections to survive/

Keeping in view the constraints of the geographical features of many states in the country, such as vast stretches of arid/semi-arid zones, large drought prone areas, limited fresh water resources, absence of coal/fossil fuel reserves etc. the developmental plan for such states should focus on eliminating the poverty while conserving/enhancing the CO2 sinks by encouraging those employment sectors which can provide jobs for a large number of people and consume minimum of the natural resources and energy, and without causing too much pollution impacts. In this context, much higher focus on forest based, agriculture based and allied sectors of our economy should be considered as immediate option for sustainable development.

We shall be focusing on those economic activities which will not lead to further diversion of forest/agricultural lands, which will not demand much of water and energy, which will not lead to pollution of land, air and water, and which will lead to sustainable harnessing of our natural resources while creating employment opportunities for a large number of people.  Such activities may include sustainable agriculture, horticulture and animal husbandry, forestry, water management, health and educational services, IT&BT, eco & health tourism etc.

In this context it is pertinent to know what Tamil Nadu State Action Plan on Climate Change (TNSAPCC) has said.  It says: “Global development experience reveals that one percent growth in agriculture (and associated activities?) is at least two or three times more effective in reducing poverty than the type of same growth emanating from non-agricultural sector.”

Hence, may I suggest that starting from this budget the govt. should focus on more of sustainable economic activities than pursuing just a high GDP growth paradigm?

F.       Recommendations to be included in the budget
Keeping all these discussions in mind it can be said that the true welfare of millions of people in this country will be ensured, if and only if the successive govt. makes honest attempt at creating an enabling scenario.  Such a scenario will be: one where the poor and vulnerable sections have just and equitable access to the bounty of nature such as the rivers, fresh water bodies, oceans,  forests, hills and mountains;  where they are adequately protected from exploitation by others in taking care of their agricultural lands and domestic animals; where they have easy, just and equitable access to education, health services and employment.

In view of my close association with energy and environment sectors, I will focus only on these two sectors and submit few associated recommendations to be considered for the budget.

Critical need for maximum focus on natural resources, environment and Climate Change
·         As a part of the five year budget strategy allocate enough resources to stop forest land diversion and tree felling; initiate action to expand the natural forest area to at least 33% of the land area by 2030; fill up all the sanctioned posts and expand, wherever necessary, in the associated departments and agencies both at the centre and states;
·         Provide adequate financial encouragement to our farmers so as to make the agriculture an very attractive profession, and so as to make it the last resort for our farmers to sell their lands for non-agricultural purposes;
·         Rejuvenate, clean, conserve and enhance rivers and fresh water bodies as a priority; de-silting of dams, lakes and other water bodies should be scientifically undertaken with active participation of the locals.
·         Financial incentive should be given to make the rain water harvesting and ground water recharging compulsory in Government  buildings, and in all large size buildings; say, with a built-in area of more than 2,000 sq. ft.
·         Provide more focus on rural development, agriculture, horticulture, dairying and allied sectors as the basic means of pulling people out of poverty;
·         Provide incentives to state governments to minimize the expansion of metropolitan cities; also consider steps to decongest cities by relocating many industries and commercial establishments wherever feasible.
·         Fund the effective action plans to bring down the air pollution and water contamination to acceptable standards (as per WHO guidelines?)
·         Encourage the states with hilly districts to ensure at the least 66% of the lands to be covered with forests and trees, and to provide them adequate compensation through eco-service payments.
·         Suitable payment for ecological services associated with trees should become an attractive incentive for people to grow and preserve more of native trees. Increased focus on social forestry and agro forestry will be benefited by such incentives.
·         Adequate funding for eco-plantations on waste lands, such as revenue lands and degraded forests, estates of Government agencies such as railways. Tree plantations should be earnestly taken up on unused waste lands, even if for only few years before the land is used for other prior identified purposes.
·         Financial incentives to encourage local bodies to grow ‘Pavitra Panchavati’ (herbal garden) at every village should be considered.
·         Suitable Incentives should be considered for assisting in growing bio-diverse and local species within and the adjacent areas of bio-diversity rich areas such as Western and Eastern Ghats, Himalayas, Sub-Himalayas, Central Indian forests, mangroves etc.
·         Subsidies and various incentives provided for growing crops which are basically meant for exporting should be diligently reviewed keeping in view the enormous costs to the society in growing such crops, such as land and water.
·         Financial incentives even for the farmers to dedicate 1/3rd agricultural land for tree planting of suitable species.
·         Consider making the use of locally grown organic products (such as locally grown fresh food, fruits and vegetables that do not require transportation so as to reduce CO2 produced by fuels used for transportation of these products) much cheaper than the products brought from a long distance, may be through differentiation in applicable tariffs.
·         Provide financial and other kinds of incentives to encourage farmers to adopt sustainable agricultural practices, which uses no chemical fertilizers or pesticides, but uses only organic fertilizers or pesticide, while needing much less water.

Make energy sector green, people friendly and fully accountable
·         Take all possible steps to make the energy sector fully green without any reliance on fossil fuel power plants, and efficient and fully relevant to our needs by 2040-45 by implementing recommendations of many reports/studies from within and outside the country.
·         Unacceptable level of technical and commercial losses in the electricity sector has been a chronic financial issue for decades leading to enormous societal level costs and unsustainability of various associated policies.  Hence, all possible budgetary support should be considered to bring down the T&D losses in the power sector below 10% by 2025; and to 5% by 2030.
·         Announce all possible incentives to encourage the changeover to renewable energy sources supported by energy storage batteries, and carbon tax or punitive measures for the fossil fuel sources so as to gradually eliminate them by 2040.
·         In view of the enormous relevance of roof top solar power systems to the energy future of the country, provide all possible financial and institutional incentives for making the same as the basis of our electricity infrastructure.  Mandate the same to contribute at the least 40% of the total electricity generation by 2040.
·         Announce all possible incentives for solar powered irrigation pump sets so as to make our farmers to have assured supply of electricity when they need it, and also to be able to be a PROSUMER through the smart battery/inverter systems.
·         Minimise the budgetary support to high voltage lines and substations. Make use of such savings to announce all possible incentives to move the electricity sector towards an era of micro grids/smart grids and a federation of micro grids in all parts of the country by 2040. 
·         Encourage setting up of energy service companies and energy cooperatives to encourage every electricity consumer to become a PROSUMER, and to manage the electricity demand/supply locally.
·         Minimise and gradually remove all subsidies to coal powered, gas powered, nuclear powered and dam based hydro power plants so as to make them financially accountable w.r.t the renewable energy systems, and to minimize the ecological damages.
·         Provide adequate assistance to make the transmission and distribution network very efficient comparable to the best in the world by 2040; also mandate financial penalties for the states, which do not achieve such a high level of efficiency.
·         Impose suitably designed green tax on petrol/diesel/coal and use it to subsidize efficient public transportation. Consider restricting/rationing the sale of fuel to vehicles.
·         Make adequate provision for much more efficient railway infrastructure, the absence of which is leading to humongous amounts of road transport related pollution;
·         Consider incentivizing the effective usage of empty spaces on either sides of railway lines and roads to grow bio-fuel plant species.
·         Provide adequate budgetary provision for the encouragement of wide spread usage of electric vehicles, and to indigenously develop suitable energy storage technologies such as batteries.
·         Infrastructural facilities in rural areas should be improved by a massive scale so that the alarming rate of urbanization that is occurring all over the country is minimized. With more than 65% of the population still in rural areas, this should have been a priority for the successive governments anyway.
·         Clean and affordable energy technology/systems, such as smokeless bio-mass stoves, solar cookers, solar pumps, solar power panels should made be easily available to rural areas at affordable prices.  
·         Incentives/penalties to make roof top solar water heaters compulsory to all residences in urban areas by 2020, and to all pucca houses by 2025.
·         Solar street lights must be made compulsory in all towns in the first phase of 5 years; should be extended to villages in 10 years.
·         Roof top solar power generation, to meet at the least 50% of their monthly electricity needs, should be made compulsory for all Government buildings, sports bodies, entertainment places in 3 years. Such a system should become compulsory to all other buildings with larger roof top surface area of say, more than 2,000 sq. ft or more than 200 units of monthly electricity demand or more than 5 kW of connected load.
·         Necessary financial incentive and/or punitive taxes should be built in to reduce the reliance on coal and diesel power in the short run, and complete elimination by 2040; specific target such as reducing annual coal energy to less than 40% of the total annual electrical energy by 2020, and less than 20% by 2030 should be the aim.
·         The usage of efficient IP sets, preferably powered by solar power in agriculture should be encouraged though suitable financial assistance, massive awareness campaigns and regulations.
·         Usage of grid electricity in night time sports should be drastically reduced and replaced, if necessary, through captive power generation through REs; a good example of KSCA cricket stadium in Bangalore commissioning 400 kW solar power system on its roof.
·         Central govt. establishments such as railways, airports, go-downs of Food Corporation of India storage places etc., which have large roof top surfaces, should be mandated/ encouraged through effective incentives to produce all the electricity they need from the roof top solar power systems.
·         Massive amounts of direct and indirect subsidies and allocations being made to nuclear power sector should be decisively and permanently diverted to encourage the overall efficiency of the electricity sector and to popularize the renewable energy sources.
·         Adequate subsidy systems to popularize clean energy systems in rural areas should become a top priority; there should be accountability to make such clean energy systems work properly; adequate focus on repair, maintenance and warranty issues will be needed to increase local employment opportunities
·         All possible encouragement / incentives should be offered to make the usage of bio-energy and gobar gas popular throughout the rural India.
·         Financial incentives through carbon credit should be considered for the usage of sustainable energy sources to reduce people’s dependence on forest wood and fossil fuels.
·         Make it clear in this budget that the carbon cess or clean energy tax will be gradually increased every year on the usage of coal, natural gas and all petroleum products until renewable energy sources become attractive enough to replace these polluting energy sources.  

It will be greatly appreciated if the arrangement is made to acknowledge this submission. 

Shankar Sharma
Power Policy Analyst
Anugraha, 5th Cross, 80 ft Road
Vijayanagar 1st stage, Sagara, Karnataka - 577 401

Phone: ++ 91 94482 72503

Jun 18, 2019

Shankar Sharma