Budget 2024: Will the energy sector shine in Finance Minister Nirmala Sitharaman’s interim act?

While everyone’s buzzing about the upcoming budget, FM Nirmala Sitharaman has thrown cold water on expectations of major announcements. Don’t despair, energy bulls! Even an interim budget can leave sparks in the energy sector, a domain destined to shine for years to come. So, let’s connect some dots and predict what could electrify our portfolios.

Flashback: Previous Budget Highlights

Remember FY23’s energy bonanza? A whopping Rs 35,000 crore fuelled the transition engine, igniting projects like the Ladakh transmission system and beefing up renewables. Battery storage got a megawatt boost, too! It was a green feast all around.

Budget Trends

FY24: Predictions with a Pinch of Salt

This year, the focus might shift from large-scale funding to strategic nudges. Think of it as fine-tuning the energy ecosystem. Here’s what could buzz:

1. Limited funding, laser focus: While the Rs 35,000 crore splurge might not be repeated, expect targeted investments towards net-zero goals and energy security. Think infrastructure, grid upgrades, and maybe some love for emerging techs like green hydrogen.
2. Net-zero ambitions take flight: Remember India’s pledge to triple renewable energy capacity by 2030? Expect policies and incentives to keep this rocket ship soaring. Think streamlined land acquisition, tax breaks for clean technologies, and maybe even a push for R&D.
3. Ethanol whispers: Don’t expect major revisions to the blending program, but don’t rule out tweaks to keep the green engine humming.

How the Indian government is planning for future economic growth through energy

Key drivers

Growing energy demand: Projected to reach 277 GW peak demand and 1,908 BU energy requirement by 2027, with faster growth expected in the following years.

Focus on renewables: Aim to achieve 500 GW non-fossil fuel capacity by 2030 and 595 GW by 2032, accounting for 66% of total power generation. This is driven by:

Climate targets: 50% renewable energy use by 2030, carbon intensity reduction by 45% by 2030, energy independence by 2047, and net zero by 2070.

Economic benefits: Abundant resources, lower tariffs, and technological advancements.

Government initiatives: Rs 24.43 trillion investment in renewable capacity additions between 2023 and 2032. National Green Hydrogen Mission with Rs 190 billion investment to produce 5 MMT annually by 2030. Target of 30% EV adoption by 2030, supported by 46,397 public charging stations and EV subsidies. Decarbonization efforts across major industries like power, steel, and cement.

Here’s a quick look at the biggest energy players by market cap, but let’s not just chase size. To see who truly leads the pack, we need to peek under the hood at free cash flow, the lifeblood of any business. Think of it as cold, hard cash left over after expenses – the king’s ransom in the energy game.

NTPC and Power Grid Corp stand out as champions of cash flow, generating massive amounts to fuel their growth. Combine that with their enviously low debt levels, and you’ve got a golden investment opportunity. They’re not just big, they’re financially fit!

Adani Power, while not a cash flow kingpin, deserves mention for its lean and mean debt profile. With minimal liabilities and the potential for future cash flow growth, it could be a dark horse worth watching.

So, remember, in the energy game, size matters, but cash flow and debt are the true crowns. Keep your eyes peeled on these players, and let the king of cash guide your investment choices!

The trajectory of the government’s economic policies hinges significantly on fiscal deficit targets and spending priorities. In the upcoming year, there is an anticipation of reducing revenue expenditure while concurrently prioritizing and enhancing capital expenditure to stimulate economic growth.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.