The Union Budget 2025-26 underscores the government’s commitment to promote renewable energy and domestic manufacturing capacity in the clean energy sector, thereby continuing to undergird a sustainable future.
A range of initiatives announced, such as expanding rooftop solar power, developing nuclear energy and bolstering domestic clean energy manufacturing, is a testimony to this.
Notably, the Ministry of New and Renewable Energy (MNRE) received a significant allocation, accounting for approximately one-third of the energy sector’s budget. The government has earmarked Rs 26,549 crore for the MNRE in the current fiscal, which is a 39% increase from the previous fiscal’s allocation of Rs 19,100 crore.
Source: Ministry of Finance
Note: The energy sector budget allocation is sourced from the Ministry of Finance’s ‘Budget at a Glance’ document
The PM Surya Ghar scheme, a key renewable energy programme, has seen notable progress, as reflected in the upward revision of the Revised Estimate (RE) over the Budget Estimate (BE) for fiscal 2025. This development is consistent with the government’s strategic objective of ensuring 30 GW of residential rooftop solar capacity by 2027. The scheme has garnered significant momentum, with 1.46 crore registrations and 27 lakh applications received as of November 2024. More than seven lakh households have already benefited from the installation of rooftop solar systems as of January 9, 2025. The scheme has received considerable impetus, with a 78% increase in allocations in the Revised Estimate for the current fiscal over the Budget Estimate, and a further 80% increase in the Budget Estimate for fiscal 2026.
Recognising the growing demand for electricity and the critical need to diversify energy sources, the government has also launched an ambitious Nuclear Energy Mission to set up 100 GW of nuclear energy capacity by 2047. The government plans to amend the Atomic Energy Act and the Civil Liability for Nuclear Damage Act to create a more conducive environment that will facilitate private sector participation as well as collaboration and investment in this area. A dedicated Nuclear Energy Mission, with a substantial outlay of Rs 20,000 crore, will be established to focus on research and development of small modular reactors (SMRs). It aims to operationalise at least five indigenously developed SMRs by 2033. The modular design of SMRs enables them to operate efficiently at flexible Plant Load Factors (PLFs), which makes these reactors a reliable source of clean energy.
To rationalise tariffs, the government has reduced the import duties on solar cells to 20% from 25% and solar modules to 20% from 40%, effective May 1, 2025. However, the Agricultural and Infrastructure Development Cess (AIDC) of 20% on modules and 7.5% on cells keep the effective rate at 40% for modules and 25% for cells.
A central theme of the budget — and a crucial one for the success of all these initiatives — is the strengthening of domestic manufacturing systems and supply chains within the clean energy sector. A key measure in this regard is the removal of basic customs duty on crucial materials on cobalt, lithium-ion battery scrap, lead, zinc, and 12 essential minerals. This move is expected to reduce the production cost of electric vehicles (EVs), clean energy, and electronics.
To further bolster the Make in India initiative, the government will set up a National Manufacturing Mission that will cover small, medium and large industries. It will provide policy support, execution road maps, and a governance and monitoring framework for central ministries and states. The mission will also support manufacturing in clean-tech. The aim of the mission is to improve domestic value addition and build an ecosystem for solar photovoltaic (PV) cells, EV batteries, motors and controllers, electrolysers, wind turbines, very high voltage transmission equipment, and grid-scale batteries
This budget strikes a balance between the country’s clean energy objectives and the necessity to have a reliable domestic supply chain, providing a positive outlook for the sector.
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