In a fiscal flex that marries atomic ambition with eco-innovation, India's 2026-27 budget drops a Rs 20,000 crore bombshell on carbon capture tech while extending duty-free imports for nuclear power plants until 2035 - a move poised to turbocharge the nation's quest for energy independence amid a warming world.
Finance Minister Nirmala Sitharaman, presenting the Union Budget on Thursday, painted a picture of sustainable growth woven into the fabric of India's economic strategy. With a GDP growth target hovering around 7 per cent, the budget sidesteps a dedicated climate chapter but embeds green incentives across sectors, from energy to urban development.
Key allocations include Rs 32,915 crore for the Ministry of New and Renewable Energy, Rs 29,997 crore for the Ministry of Power, and Rs 24,124 crore for the Department of Atomic Energy - a trifecta aimed at tackling intermittency in renewables and slashing import reliance.
At the heart of the green push is a Rs 20,000 crore infusion over five years for Carbon Capture, Utilisation and Storage (CCUS) initiatives targeting hard-to-abate industries, including power, steel, cement, refineries, and chemicals.
The CCUS is a way to reduce carbon dioxide emissions in the atmosphere. As a climate mitigation technology, it has been under scrutiny for its effectiveness in reducing industrial emissions and its potential to achieve zero emissions in the future.
"The focus of the government is rightly tilting towards building an energy transition ecosystem," said Aarti Khosla, Founder & Director of Climate Trends, praising the allocation alongside exemptions for battery manufacturing and viability gap funding for battery energy storage systems (BESS). She added that continued power distribution reforms could deliver a "360-degree improvement" in India's green supply chains, though she lamented the lack of stronger measures against air pollution, such as accelerated EV adoption.
Nuclear power steals the spotlight as the government proposed extending the basic customs duty exemption on imports of goods required for nuclear power projects up to the year 2035. The exemption of the levy for eligible goods used across all nuclear plants, regardless of capacity, has been extended. This move, the government says, will support manufacturing requirements critical to expanding nuclear energy infrastructure.
This, coupled with exemptions for lithium-ion cells (now including battery storage), sodium antimonate for solar glass, and capital goods for critical minerals processing, signals a robust effort to fortify clean tech supply chains. "While the Budget delivered no big-ticket announcements for renewables, continued duty exemptions, support for critical minerals, and manufacturing reforms are expected to quietly strengthen clean energy supply chains," noted Duttatreya Das, Energy Analyst at Ember, who suggested additional capital subsidies could unlock even more potential in PLI-led manufacturing.
On cleaner fuels, the budget excludes the entire value of biogas from central excise duty on biogas-blended compressed natural gas (CNG), boosting waste-to-energy projects and urban gas distribution. Vibhuti Garg, Director for South Asia at the Institute for Energy Economics and Financial Analysis (IEEFA), hailed the macro-fiscal ambition - aiming for a 4.4% fiscal deficit this year and 4.3 per cent next - but critiqued uneven support for energy transition. "Allocations for schemes like PM Surya Ghar Muft Bijli Yojana have increased, but spending on wind energy, transmission, and energy storage has stagnated or declined," she said, emphasising that these are "indispensable" for integrating renewables into the grid.
Urban sustainability gets a nod with Rs 5,000 crore per City Economic Region over five years for Tier-2 and Tier-3 cities, plus incentives for municipal bonds: Rs 100 crore for cities issuing over Rs 1,000 crore, and continuation of AMRUT incentives for smaller issuances. Jaya Dhindaw, Executive Program Director for Sustainable Cities at WRI India, welcomed the focus on city regions as growth hubs but warned, "Without clear institutional ownership, dedicated funding streams, and a planning authority that operates beyond municipal boundaries, they risk remaining little more than cartographic exercises."
The budget ties nature conservation to livelihoods and tourism, proposing ecologically sustainable trails for mountain, turtle, and bird-watching in the Himalayas, Ghats, and coasts. It also prioritises high-value crops like coconut, cocoa, cashew, and sandalwood to uplift farm incomes and cut imports, while developing 500 reservoirs and Amrit Sarovars for fisheries.
Experts like Arunabha Ghosh, CEO of the Council on Energy, Environment and Water (CEEW), see the budget as a "beacon" for India's future. "The announcement of Rare Earth Corridors and a Semiconductor Mission 2.0 moves India decisively from policy intent to state-level execution," he said, highlighting the need for offtake guarantees and R&D to bridge gaps in critical minerals processing. Rishabh Jain, a CEEW Fellow, echoed this, noting that duty exemptions on processing machinery "directly de-risks private entry" in mineral-rich states like Odisha, Kerala, Andhra Pradesh, and Tamil Nadu.
Yet, not all is rosy. Prof Anjal Prakash, an IPCC author and Research Director at the Bharti Institute of Public Policy, praised the shift to "rigorous execution" via competitive federalism but pointed out shortfalls. Abinash Mohanty of IPE Global called the budget a "fill-in-the-blank" on climate adaptation, decrying the absence of scaled-up funding for heat action plans, flood-resilient infrastructure, or water security despite annual economic losses exceeding 3% of GDP.
Transportation sees a green pivot: 20 new national waterways over five years, starting in Odisha, with training institutes in Varanasi and Patna; indigenisation of seaplane manufacturing; and seven high-speed rail corridors linking major cities like Mumbai-Pune and Delhi-Varanasi-Siliguri. The goal? Double the share of coastal shipping and inland waterways to 12% by 2047.
Saurabh Kumar, an energy expert, commended the "balanced and focused" approach, spotlighting incentives for BESS at par with EVs and tax holidays for data centres to spur clean energy demand. "These are essential to attract capital and investment to reduce costs and dependence," he said.
Trishant Dev from the Centre for Science and Environment (CSE) framed the measures as part of a "broader push for industrial competitiveness," while Sehr Raheja of CSE highlighted the focus on critical minerals for "green industrialisation and domestic value addition."
Labanya Prakash Jena, Director of the Climate and Sustainability Initiative, noted that restructuring PFC and REC could "improve credit allocation" for clean energy, and municipal incentives might encourage green bonds for pollution control.
Jagjeet Sareen of Dalberg Advisors praised the depth added to the National Manufacturing Mission: "The continued emphasis on domestic value addition across solar, wind, hydrogen, EV and grid-scale batteries reflects a clear shift from intent to implementation."
Bharat Jairaj of WRI India lauded the PM Surya Ghar allocation for rooftop solar, which could save costs for 3.3 lakh MSMEs. Ulka Kelkar, also from WRI India, stressed that MSME support could build climate resilience amid risks like heat stress and flooding.
Overall, while the budget advances industrial climate tools, it falls short on renewable targets, EV infrastructure, and adaptation finance. As experts put it, the air pollution focus "could have been stronger." Still, in a world racing toward net-zero, India's fiscal blueprint offers a compelling mix of pragmatism and ambition - one that could redefine "Viksit Bharat" as a green powerhouse.
