Shining Bright: How India's march towards energy security got a big boost in Budget 2025

If numbers can tell a story, consider this: allocation to clean energy got a near 40% boost in FY26 over the last fiscal, with the solar segment getting three-fourths of the pie. The rooftop solar scheme was a clear winner, seeing a 220% jump in capital expenditure (capex) this year. This sits well with the government’s ambitious plan of supplying solar power to 10 million households by March 2027, according to the Ministry of New and Renewable Energy.

The second-highest allocation went to the coal sector-a 160% jump-as India continues to rely on coal for meeting its energy demands. This also includes a Rs 300 crore allocation for coal and lignite gasification-a lower emission pathway.  

The Budget also looks at stepping up clean tech manufacturing to develop domestic markets and increase nuclear power generation, electricity distribution reforms, and augmentation of intra-state transmission capacity by states.

Pratik Agarwal, Managing Director of power transmission company Sterlite Power and Chairman of renewable green energy company Serentica Renewables, says while there is a continued focus on domestic manufacturing of generation and storage equipment, there is new-found mention of high-voltage transmission equipment.

“Given that there are global deficits in this product category, focussing on this sub-segment is a very sound move,” Agarwal adds.

Power of the sun

China has a clear supremacy in the manufacture of solar cells and modules, and control over critical minerals and transmission equipment, as illustrated by the Economic Survey 2024-25. The Survey, however, also emphasised focus on domestic manufacturing for sustainable growth of the industry.

The Budget looks to address that through a manufacturing mission supporting the clean tech sector to build a local ecosystem for solar PV cells, EV batteries, motors and controllers, electrolysers, wind turbines, very high voltage transmission equipment and grid-scale batteries.

Varchasvi Gagal, Managing Director & CEO of Datta Infra, a clean energy player, says the initiative to promote solar cell manufacturing is a strategic step towards creating a robust ecosystem in India, supported by the Production-Linked Incentive (PLI) scheme.

“…It will significantly accelerate the country’s progress towards achieving its ambitious 500-gigawatt (GW) renewable energy target by 2030. By promoting in-house module assembly and cell manufacturing, India can reduce its dependence on imports,” Gagal says.

Solar is set to be the largest contributor in achieving the 500 GW non-fossil fuel power target by 2030, from the current installed capacity of 209 GW. The Budget looks to support the 50 GW annual renewable capacity addition needed to meet the target in the next five years.

The FM also lowered the Basic Customs Duty (BCD) on imported solar cells from 25% to 20%, and on solar modules from 40% to 20%.

The PM-KUSUM, or the Pradhan Mantri-Kisan Urja Suraksha evam Utthan Mahabhiyan Scheme, a government initiative to promote renewable energy and energy security for farmers in India, saw a 73% increase in budgetary support. It received Rs 2,600 crore, as opposed to Rs 1,496 crore in FY25. “With farmers collectively getting nearly 75% of all electricity subsidies, solar irrigation could shift demand to daylight hours and power our renewable future,” says Shruti Sharma, Lead Energy Programme of independent think tank International Institute for Sustainable Development.

In a boost to minerals needed for energy transition, the government exempted cobalt powder and waste, the scrap of lithium-ion batteries, lead, zinc and 12 other critical minerals to help secure their availability for manufacturing in India.

NUCLEAR BOOST

The Budget renewed the support for nuclear energy with the introduction of a Rs 20,000-crore Nuclear Energy Mission aimed at developing small modular reactors (SMRs), signaling India’s focus on cutting emissions in energy production.

The initiative targets the operationalisation of at least five indigenously developed SMRs by 2033. Experts hail this as a big step.

To fast track private investment, the government said it would take up amendments to the Atomic Energy Act and the Civil Liability for Nuclear Damage Act. The target is for the development of at least 100 GW of nuclear energy by 2047.

The government has invited bids from private players for the Bharat Small Reactors (BSR) announced in the last Budget. Some of the major players-Tata Power, Reliance Power, JSW Energy, NTPC and IOCL-are already looking to foray into the nuclear sector as part of their decarbonisation goals. Nuclear is considered a clean source of energy and these companies are looking to partner with the Nuclear Power Corporation of India for R&D.  

Distribution REFORMS

The power sector reforms to curtail losses to state power distribution companies (discoms) have remained a challenge. The total debt of discoms rose to Rs 70,000 crore during 2022-23, according to the annual discoms audit report of Power Finance Corporation (PFC), published in 2024.

The Budget announced incentives for electricity distribution reforms and augmentation of intra-state transmission capacity by states to improve the financial health and capacity of electricity companies. The government has allowed an additional borrowing of 0.5% of GSDP (gross state domestic product) to states contingent on these reforms.

Sterlite’s Agarwal says India’s power sector is doing quite well when it comes to generation and inter-state transmission but it’s the last mile transmission & distribution (T&D) that needs the most attention.

The Reform-Linked Distribution Scheme to get private investment in the power transmission and distribution segment saw a 30% increase in Budget allocation for FY26.

The scheme envisages support to discoms if they adopt reform packages, including public-private partnerships for discoms and adoption of various franchisee models at the distribution level, including multiple supply franchises. However, states have remained reluctant to allow private investments in discoms.

Power is fundamental to a country’s growth story. The government’s focus has been on ramping up power availability to meet rising demand. The FY26 Budget has given the needed impetus to expedite manufacturing, reforms and infrastructure development.

@richajourno