India's success as a global leader in sustainable development, demands we reorient our approach towards economic growth, energy security, and environmental governance, which can be accomplished with effective financial planning. 

The long-term goal of Net Zero by 2070 is attainable if we succeed in fulfilling our Nationally Determined Contributions (NDC). The updated NDCs submitted to the United Nations Framework Convention on Climate Change (UNFCCC) in 2022 mention three important measurable targets. 

First, to reduce the emission intensity of India’s GDP by 45 per cent by 2030, to achieve 50 per cent cumulative electric power installed capacity from non-fossil fuel-based energy resources by 2030, and third to create an additional carbon sink of 2.5 to 3 billion tonnes of CO2 through additional forest and tree cover by 2030.  

According to The Energy & Resources Institute (TERI), to achieve the goal of creating additional carbon sinks of 2.5 to 3 billion tonnes of CO2, India’s forest and tree cover would need to increase significantly. The India State of Forest Report (ISFR) 2021 estimates total forest cover at 7,13,789 sq km; when compared to ISFR 2019, it has increased by only 1,540 sq km, which is clearly not enough. 

To accomplish this goal, Rs 60,000 crore per annum is required, but only Rs 11,256 crore per annum is spent and a large funding gap exists. States with larger areas under forest cover have higher requirements, for example, Madhya Pradesh need to spend Rs 6,164 crore per annum to fulfill the NDC which will be 2.1 per cent of its annual expenditure. 

The Ministry of Environment, Forests & Climate Change (MoEFCC) has a central role to play in India’s sustainable development pursuits, the creation of carbon sinks requires enhancement of our carbon sequestration potential, which is based on sustainable forest management and development of agroforestry among other things. 

The major initiatives here such as the National Afforestation Programme and the National Mission for Green India (NMGI), are led by the ministry. The much-needed financial support, however, is not available, for example, the funds released under the NMGI stood at Rs 106.01 crore in 2019-20 which increased to a meagre Rs 116.01 crore in 2022-23.

The Compensatory Afforestation Fund Management and Planning Authority (CAMPA) was set up in 2016, to compensate for the loss of forest land and ecosystem services through compensatory afforestation. In 2019-20, Rs 47,855 crore was transferred to States under CAMPA, the fund transferred in 2020-21 stood at Rs 621 crore, and in 2021-22 was Rs 2,846 crore. 

In 2022-23, the share of MoEFCC in the total expenditure of the Central Government was 0.39 per cent; in 2024-25, it has increased to 0.46 per cent, and is simply insufficient to achieve NDC goals. 

In comparison, the Ministry of Road Transport & Highways has seen its share in total expenditure increase from 5.17 per cent to 5.83 per cent over the same period. The demand for grants submitted by the MoEFCC is also minuscule: in 2022-23, it was Rs 2,837.75 crore, which is 0.029 per cent of the total demand for grants in the budget. 

In the 2024-25 budget estimates, the demand for grants submitted was Rs 3,913.78 crore and the share in total demands has remained the same at 0.028 per cent. The expenditure incurred by MoEFCC on Central Sector Schemes and Centrally Sponsored Schemes combined has not changed much: in 2022-23, it stood at Rs 1,303 crore and has grown to Rs 1,787 crore by 2024-25. 

Given the MoEFCC's paucity of funds, and its central role in achieving India’s afforestation targets, the Union Budget 2024-25 must take steps to improve funds flow to the Ministry.

Recognising the need for external financial support towards the fulfillment of NDCs, the Ministry of Finance developed the Green Bond Framework, which would allow the government to raise funds from the financial market to invest in pro-environment activities such as renewable energy, forest conservation, etc. 

The market has welcomed India’s green bond issuance. In 2022-23, Sovereign Green Bond/ISGB issuances raised Rs 16,000 crore. In 2023-24, Rs 20,000 crore were raised from SGBs and the government plans to raise Rs 12,000 crore in 2024-25. This increased funding for environment-related activities can give a massive boost to the fulfillment of India’s NDCs. 

There is, however, a need for institutional reform. The funds raised from green bonds are deposited with the Public Debt Management Cell of the Ministry of Finance, but the trajectory of fund disbursement is not clearly outlined. 

The framework provides information on this process, but the funds' actual utilisation is unclear. The process needs to be made more transparent, as the fund flow of green bonds incentivises the private sector to participate in environmental projects since it bolsters their credentials as a responsible corporate citizen. 

The Union Budget 2024 could consider improving the funding to the Ministry of Environment, Forests & Climate Change (MoEFCC), as this will signal the Government’s commitment to building a greener resilient future. 

The development of financial channels for private sector participation will integrate private capital into India’s sustainable development agenda and bridge the much-needed climate finance gap.  

(Garg is former Special Secretary, Ministry of Environment, Forest & Climate Change, India and is President, Mobius Foundation, and Rathore is a research associate, Mobius Foundation. Views are personal)