As Indian budget increases climate allocation, coherent governance becomes an even more critical need

Anju Sharma and Pratim Roy*

India’s 2015 budget was announced last week – the second budget of the National Democratic Alliance government, in power since May 2014. Although it includes an allocation for climate change, it sends out very confusing signals on the status and governance of climate finance in India.

First a Fund, now a Mission

Last year in July, in its first budget shortly after it came to power, the NDA government announced ₹100 crore (US$16 million) for a “National Adaptation Fund” to be managed by the Ministry of Agriculture. This was completely out of the blue – no such fund actually existed at the time, it is not clear if it ever came into being, how it was to be governed, or what the money was to be used for. Its creation was, however, reported in India’s briefing paper for the UN climate conference in Lima, Peru, last November, called India’s Progress on Combating Climate Change.

Seven short months later, the 2015 budget states that the “scheme of Adaptation Fund” which was “hither to part of [Department of] Agriculture Research and Education has been transferred to [Ministry of] Environment and Forest and merged with Mission on Climate Change”.

This time, ₹160 crore (US$ 26 million) is allocated to this mysterious “mission on climate change and adaptation”, which does not exist as yet in any meaningful sense. There are eight missions under the National Action Plan on Climate Change (NAPCC), with a total allocation of ₹36,625 crore (US$ 6 billion) for the 2012-2017 period under the 12^th Five Year plan, but none of them are called Mission on Climate Change.

How much, exactly?

It is also mysterious that the 2015 budget says ₹10 crore (US$1.6 million) was provided for the National Adaptation Fund, not ₹100 crore as announced in July 2014. Did a zero go missing because only ₹10 crore of the 100 crore was used so far? The 100 crore was announced as “an initial sum” towards the Fund, so shouldn’t it carry over? Will the ₹160 be additional?

The lack of clarity on climate finance announcements has existed before these two budget announcements. For instance, the amount the government says it spends on adaptation has been disputed. At the 2014 Lima conference, Indian environment Minister Prakash Javadekar listed US$ 3 billion from a national coal cess as climate finance. However, this cess, collected in a National Clean Energy Fund (NCEF) and increased from ₹100 to ₹200 per tonne of coal produced in the 2015 budget, is not explicitly linked through policy to any specific climate-related goal, and the majority of the funding is being used for activities that are not related to clean energy, such as cleaning up the Ganga.

With this confusion around figures, it is very difficult for the country to assess what is actually being done to address adaptation and mitigation, and to track progress.

Who decides?

The second critical issue that arises in the context of all these budgetary announcements is that of governance. Who will decide how the ₹160 crore, and other funds earmarked for climate-related activities, will be used?

What was the basis for the decision to shift the adaptation component from the Ministry of Agriculture to the MoEFCC? How will other ministries and departments, also critical actors in the response to climate change, be involved in this decision-making? How will those who are most affected by climate change – the individuals who are already paying the price for climate change – be involved in the decision-making process?

Some months ago, we initiated a research project on the governance of climate finance in India. The Ministry of Finance had initiated a stakeholder dialogue on the possible institutional arrangements for climate finance, mostly from the perspective of readiness for the Green Climate Fund (GCF), and we were looking to provide some recommendations. Our starting point, however, was not so much the institutional arrangements for GCF readiness alone. We felt that was a secondary consideration, and the Ministry of Finance should first focus on institutional arrangements for domestic climate finance. International sources should then be made to seek synergies with these domestic arrangements.

Our main concern in this context was to consider what sort of governance structure could effectively channel climate finance (both national and international) to the most vulnerable, quickly and without too many top-down targets and conditionalities.

Critical actors missing

The idea was not so much to talk to the usual climate change suspects (the MoEFCC and its state departments, and NGOs working on climate change), but to national and sub-national actors who already had a track record of effectively reaching out to poor communities. Hence we sought out community representatives; representatives of institutions (including ministries) working on decentralised governance, agriculture, rural development, and public finance; and actors implementing existing national programmes that reach out to vulnerable communities, such as the National Rural Employment Guarantee Scheme and the National Rural Livelihood Mission.

This proved to be an educative trip in many ways. Most of the people we spoke to should be critical actors in climate finance decision-making, but were completely out of the loop, and poorly informed about climate change. They had a wealth of relevant knowledge and experience when it came to channelling finance to poor communities, but no way of bringing this to bear in the climate change context. Clearly, there is an urgent need to broaden the discussion on climate change in India beyond traditional “environmental” actors, and to make the decision-making process more public.

What became even more stark, however, is that there is no national system currently in place to ensure that climate finance has clear, common and coherent goals, avoids overlaps, reaches the most needy, and actually achieves its goals.

The dangers of such a rudderless ship are amply demonstrated by the NCEF. Despite a healthy corpus, the Fund is floundering. A review of the NCEF’s performance by the National Institute of Public Finance and Policy has attributed this poor performance to the lack of an overall vision and strategy; lack of clearly defined targets and a roadmap; and lack of a feedback mechanism to assess, learn and improve. There is no transparency in its functioning, and no mechanism to engage with stakeholders. The allocation and disbursement of these funds has been slow despite a backlog of clean energy projects awaiting funding, and it appears funds can be allocated quite randomly (including for activities as unrelated to clean energy as the Ganga cleaning project).

Consolidation without centralisation

There is a clear need to “consolidate” the governance of climate finance at the national level, to give it more coherent direction. A national body is needed, with representation from all relevant sectors and levels (states, districts, Panchayats), communities, and non-government experts. (India strongly argued for a democratically governed mechanism to consolidate climate finance at the global level, in order to strengthen country ownership. This led to the formation of the GCF. The very same arguments hold true when it comes to sub-national ownership).

The current PM’s Council on Climate Change could serve this purpose (it certainly has the clout to make mainstream ministries to sit up and take notice), but it would have to be reconstituted to include critical actors and segments of society that have been left out so far, such as the ministries of rural development, and Panchayat Raj. It will also need to depart rather significantly from its current rather  ad hoc and “centralised” mode of functioning, where National Plans are written without even the semblance of national consultation, and years lapse between meetings.

Instead, it’s central mandate should be to “consolidate for devolution”, in keeping with India’s 73^rd and 74^th Constitutional Amendments. It should aim to devolve decision-making to the lowest possible level, where actual implementation will take place, and put communities in the driving seat, so they can assess their own needs, plan responses, and quickly access funds to implement them.

This was the other curious fact that struck us about climate governance in India. While devolution and the strengthening of Panchayati Raj Institutions has been firmly on the national agenda for a couple of decades now, the climate change discussion appears to take place completely outside this broader national context. As several previous blogs on this site have emphasised, a lot of learning has taken place in the broader development context, on how to operationalise devolution. Given that the response to climate change is a race against the clock, it is absolutely essential that all this experience is brought to bear in the devolution of climate finance decision-making.

In our next blog, we will explore how to make devolution a central item on the climate finance agenda, and how to make it compatible with the sort of consolidation we have proposed here. For now, however, we cannot emphasise enough the need for much greater clarity on how much climate finance is actually available and what it is meant to achieve, and democratic governance arrangements to develop and implement a clear vision and roadmap, with concrete goals and milestones.

*Pratim Roy is Founder Director of Keystone Foundation,  a group working on eco-development initiatives in the Nilgiris district of Tamil Nadu, India, since 1995.

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