The National Clean Energy Fund (NCEF) was a fiscal mechanism established by the Government of India in 2010 to fund clean energy initiatives. It was created following the “Polluter Pays Principle,” specifically targeting carbon emissions from the power sector. In 2015-16, its scope was expanded to include broader environmental initiatives, leading to its renaming as the National Clean Energy and Environment Fund (NCEEF).
Origin and Financing Mechanism
The fund was built primarily through a “Clean Energy Cess” (later “Clean Environment Cess”), a green tax levied on coal produced in India and imported from abroad.
- Established: Finance Bill 2010-11.
- Nature of Fund: Non-lapsable fund under the Public Account of India.
- Administrative Body: The Department of Expenditure, Ministry of Finance.
- Selection Process: Projects are recommended for funding by an Inter-Ministerial Group (IMG) chaired by the Finance Secretary.
Evolution of the Clean Energy Cess
The cess rate underwent several revisions before the implementation of the Goods and Services Tax (GST) in 2017.
| Year | Cess Rate (per tonne of coal) |
| 2010 | ₹50 |
| 2014 | ₹100 |
| 2015 | ₹200 |
| 2016 | ₹400 |
Objectives and Eligible Projects
The NCEEF was designed to support research, development, and innovative projects that reduce India’s carbon footprint.
- Clean Energy Research: Funding for advanced solar, wind, tidal, and geothermal energy technologies.
- Transmission Infrastructure: Supporting the Green Energy Corridor for evacuating renewable power.
- Environmental Remediation: Projects like Namami Gange and the National Green India Mission.
- Alternative Fuels: Development of biofuels, hydrogen fuel cells, and carbon capture and sequestration (CCS) technologies.
- Critical Infrastructure: Funding for Common Effluent Treatment Plants (CETPs) and smart city components related to green energy.
The GST Transition and Discontinuation
With the rollout of the Goods and Services Tax (GST) on July 1, 2017, the fiscal landscape of the NCEEF changed fundamentally.
- Subsumption: The Clean Environment Cess was abolished and replaced by the GST Compensation Cess.
- Diversion of Funds: Under the GST regime, the proceeds from the cess on coal are now primarily used to compensate states for revenue losses arising from the transition to GST, rather than being exclusively earmarked for clean energy projects.
- Current Status: While the NCEEF still exists on paper for settling old commitments, it no longer receives fresh inflows from the coal cess. Modern climate finance in India has since shifted toward Sovereign Green Bonds and viability gap funding (VGF).
Critical Analysis for UPSC Prelims
Aspirants should focus on the specific reasons why the NCEEF was often criticized in various CAG (Comptroller and Auditor General) reports:
- Underutilization: A significant portion of the collected cess was never actually transferred from the Consolidated Fund of India to the NCEEF in the Public Account.
- Diversion for Fiscal Deficit: At various points, funds were used to meet budgetary shortfalls rather than specific green technology R&D.
- Bureaucratic Delays: The Inter-Ministerial Group process was often cited for slow project approvals, leading to a large unspent corpus.
Key Facts and Trivia
- Polluter Pays Principle: The NCEF was the first major Indian fiscal tool to internalize the environmental cost of fossil fuels at the production level.
- Inter-Ministerial Group: Includes representatives from the Ministry of New and Renewable Energy (MNRE), Ministry of Power, Ministry of Coal, and NITI Aayog.
- MNRE Dominance: Historically, nearly 70% of the funds disbursed from NCEEF went to the Ministry of New and Renewable Energy for grid-connected power projects.