Mr. Ramesh Shivanna
Chief Technical Officer
Nithin Sai Renewables Pvt. Ltd.
The Union Budget 2026, presented on 1 February 2026, stands out as a forward-looking and growth-oriented fiscal blueprint for India’s energy landscape. At a critical juncture as the country accelerates its energy transition and clean-tech ambitions, the Budget strikes a balance between pragmatic incentives and visionary investments — aligning climate commitments with industrial competitiveness and technological leadership.
Carbon Capture, Utilisation & Storage (CCUS): A Big Bet on Hard-to-Abate Sectors:
A marquee announcement was the ₹20,000 crore allocation over the next five years to scale CCUS readiness across power, steel, cement, refineries, and chemical industries. This is a welcome recognition of the need to decarbonise sectors where renewable substitution alone is not yet technologically or economically viable.
From an industry perspective, CCUS financing will incentivise deployment of capture technologies, improve industrial energy efficiency, and create a domestic ecosystem encompassing pilot projects, indigenous technology development, and skilled jobs in carbon management and monitoring. More importantly, this takes India closer to its net-zero by 2070 commitment without sacrificing output or competitiveness.
However, this initiative is still in a nascent stage globally. CCUS remains capital-intensive and commercially challenging in the absence of robust carbon pricing, incentive mechanisms, or credit markets. Without such enablers, private investment may remain constrained — a gap that policymakers must urgently address if India is to move beyond pilot projects toward large-scale deployment.
Strengthening Renewable Supply Chains:
The Budget took a significant step in reinforcing India’s renewable manufacturing ecosystem:
- BCD exemption on capital goods for manufacturing Li-ion cells for BESS
- Nil BCD on sodium antimonate, a critical input for solar glass
These moves will reduce the upfront cost burden for battery and solar component manufacturers, making domestic cell lines and solar glass fabrication more economically viable. This aligns with India’s goals for secure battery supply chains — essential for grid storage, EV infrastructure, and renewable scale-up.
However, duty relief alone, while positive, may not suffice to make India globally competitive in battery manufacturing. Challenges such as access to high-grade raw materials, advanced cell technologies, and assured long-term offtake remain. Without parallel incentives — including demand guarantees or export credits — the full benefit of duty exemptions may not materialise.
Nuclear Power Get a Longer Runway:
Extension of BCD exemptions for nuclear power equipment till 2035, expanded to all plant capacities, and reduction in duties on nuclear components signals strong support for baseload low-carbon power. Capital cost relief could improve project viability and investor confidence for new nuclear deployments.
Yet nuclear energy projects globally are capital-heavy with long lead times and regulatory complexities. Tariff relief is necessary but not sufficient — it must be supported by strengthened project execution frameworks to deliver predictable timelines and cost outcomes.
Bioenergy Blending Gets a Break:
By excluding the entire value of biogas from excise computation on biogas-blended CNG, the Budget improves the economics of compressed biogas (CBG) production and distribution. This should enhance offtake for biogas producers and encourage blending initiatives.
Still, fundamental challenges persist — feedstock aggregation, infrastructure for grid injection, and uneven pipeline coverage — which require focused policy support beyond tax breaks.
Critical Minerals: Supply Chain Resilience:
Exempting BCD on monazite and on capital goods for critical mineral processing strengthens India’s position in the upstream battery and clean-tech supply chain. It reduces costs for domestic mineral processing and improves energy security of supply for key inputs in batteries, electronics and future technologies.
Strategically, this is a forward step in reducing dependence on foreign refining hubs, but limited domestic reserves and technology gaps must be bridged through targeted exploration incentives and international partnerships.
Indirect Enablers: Financing & Growth Signals
Restructuring PFC and REC:
The proposed restructuring of Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) aims to build scale and efficiency in public sector NBFCs, with potential benefits for cost and availability of debt financing for energy infrastructure. The actual impact will depend on governance outcomes, risk frameworks, and credit allocation strategies.
Higher Public Cap Ex & Infrastructure Guarantees:
With public capex raised to ₹12.2 lakh crore and the introduction of an infrastructure risk guarantee fund, energy infrastructure financing may become more accessible, especially for grid modernisation, storage, and renewables integration. These enablers are critical, given the capital-intensive nature of the energy transition.
Other ancillary measures — including the Semiconductor Mission 2.0, container manufacturing schemes, SME growth funds and Corporate Mitra — indirectly improve the competitive landscape for energy manufacturers and service providers.
Final Take:
Growth-Oriented, Sustainable, and Tech-Enabled. Overall, the 2026 Union Budget reflects an energy strategy that is growth-oriented, sustainability-focused, and technology-embracing. It integrates climate goals with industrial policy, emphasises domestic manufacturing, and recognises future technologies like CCUS and critical mineral processing.
A notable highlight is the implicit push toward AI and digitalisation across the energy ecosystem — from optimisation of CCUS operations and renewable forecasting to smart manufacturing and grid management. This signals India’s intent to not only catch up with global technology trends, but to lead in areas where digital and energy transitions intersect.While implementation challenges remain — particularly around commercialization models, financing structures and supply chain bottlenecks — the Budget lays a thoughtful foundation for India’s energy sector transformation. With continued policy refinement and collaborative stakeholder engagement, India is well positioned to lead the global clean energy revolution.