India’s Union Budget 2026 marks more than a fiscal exercise, it sets a structured reimagination of country’s growth strategy, with energy being a key focus area to move towards the goal of Viksit Bharat by 2047. Rather than merely expanding energy generation capacity, the government appears to be pivoting toward building domestic industrial capacity, securing upstream resources, and future-proofing the economy against geopolitical and climate risks by reducing vulnerability through energy independence. The vision is clear: energy security is no longer about supply; it is about justice and sovereignty, building manufacturing strength through transformed industrial policy.
For years, India’s clean energy story was dominated by ambitious renewable targets - solar deployment, wind installations, batteries, etc, and digitalisation of the network. While impressive, this approach left the country dependent on imports like — solar wafers, battery materials, electrolyzer’s and hence critical minerals —exposing newer vulnerabilities, import insecurities and anxieties. Budget 2026 attempts to close that gap.
The extension of customs duty exemptions for battery energy storage systems (BESS) and critical mineral processing is a notable step toward strengthening upstream capacity. By lowering the costs of capital goods and inputs for MSMEs, policymakers are effectively nurturing a domestic ecosystem that can support the next phase of India’s energy transition by integrating upstream capacity with downstream demand segments.
India has long excelled in solar deployment but lagged in component manufacturing. Budget 2026 reduced basic customs duty on key inputs such as sodium antimonate used in solar glass, while allowing exemptions on copper wire and rods for photovoltaic ribbons until 2028. At the same time, the sunset clause on duty exemptions for silicon wafers sends a subtle but powerful signal: localise production or risk losing tariff advantages. This combination of incentives and deadlines is classic industrial strategy, carrot paired with credible pressure. If executed effectively with an integrated system approach, India could shift from assembling modules to controlling larger portions of the solar value chain.
Equally significant is the elevation of battery energy storage to infrastructure status. Storage is often overlooked in public debates, yet it is indispensable for stabilising renewable heavy grids. Treating it as infrastructure unlocks financing avenues and reduces risk perceptions, potentially accelerating deployment with domestic infrastructure resilience and stability. This states that the transition is not just about generating clean power but managing variability.
Perhaps the most geopolitically consequential move in the budget is the full customs duty exemption on 25 minerals, including lithium-bearing ores, cobalt powder, and rare earth elements. Tax deductions for exploration expenses further incentivise domestic prospecting. Rare earth corridors planned across multiple states and duty exemptions on processing capital goods underline an ambition to embed India deeper into global supply chains. In an era when mineral access increasingly defines technological power - from electric vehicles to semiconductors - this is less an economic policy than a strategic doctrine for a clean energy transition for the future.
Nuclear power is receiving long-term policy stability. Customs duty exemptions on nuclear project goods have been extended and expanded to cover all capacities, removing earlier plant-size restrictions. The government is also targeting large-scale capacity growth toward mid-century as deep decarbonisation achievement without firm baseload power is extraordinarily difficult. Nuclear energy, once politically contentious, is being reframed as a reliability asset.
Finally, the proposed carbon capture, utilisation, and storage (CCUS) mission—backed by roughly Rs 20,000 crore over five years—signals India’s entry into the next frontier of climate policy. A hub-based deployment strategy aims to reduce abatement costs while protecting export competitiveness, particularly in the face of mechanisms like the EU’s Carbon Border Adjustment. The inclusion of refineries in carbon credit trading frameworks further indicates a shift from incremental efficiency toward “deep decarbonisation” mostly through a mitigation lens. If implemented well, this could align Indian industry with emerging global carbon norms—turning climate compliance into a competitive advantage through market-based structures.
Budget 2026 sketches an ambitious blueprint: secure minerals, localise manufacturing, stabilise grids, decarbonise industry, and maintain fiscal momentum. The system focused integrated nature of these moves suggests that India increasingly views energy policy as industrial policy. Still, the distance between budget announcements and real-world transformation is vast. Coordination across ministries, regulatory predictability, and private-sector confidence will determine whether this becomes a turning point or just another well-written policy document.
Hence, the real question is not whether India can build a new energy ecosystem, but whether it can do so fast enough to shape, rather than merely react to, the emerging global order.
The author is director-in-charge, Ashoka Centre for a People-centric Energy Transition
