The Union Budget 2025-26, presented on February 1, 2025, outlines a strong commitment to renewable energy, electric mobility, and clean technology manufacturing. According to a Press Information Bureau (PIB) release, the budget increases funding for solar power, grid modernization, green hydrogen, and electric vehicle (EV) supply chains, alongside policy changes aimed at expanding nuclear power and boosting domestic manufacturing. The government’s strategy focuses on reducing reliance on fossil fuels while ensuring energy security and infrastructure expansion.
Renewable Energy Sector Sees Record Budget Allocation
The Ministry of New and Renewable Energy (MNRE) has received ₹256.49 billion, marking a 39% increase from last year’s budget. The largest share—₹241 billion—has been allocated to solar energy projects, underscoring the government’s focus on expanding rooftop solar installations, supporting farmers with solar-powered irrigation, and improving solar grid infrastructure.
A significant boost has been given to the PM Surya Ghar Muft Bijli Yojana, which provides 300 units of free electricity per month to eligible households. Its budget has been increased by 81%, from ₹110 billion in FY25 to ₹200 billion in FY26. This scheme targets 10 million households, offering financial assistance covering 60% of the cost for 2 kW solar systems and 40% for 2-3 kW systems.
As of December 2024, 630,000 rooftop solar installations have been completed, with Gujarat leading at 281,769 installations (46%). However, the PIB release notes challenges in states like Telangana, where subsidy uptake has been lower due to technical issues in the solar portal and power distribution constraints.
To support the integration of solar and wind power into the national grid, ₹60 billion has been allocated for Green Energy Corridors (GECs), ensuring better transmission of renewable energy. Additionally, ₹160 billion has been set aside for the Revamped Distribution Sector Scheme (RDSS), focusing on smart metering, infrastructure upgrades, and DISCOM financial stabilization.
Green Hydrogen and Clean Energy Technologies Gain Momentum
The National Green Hydrogen Mission has received ₹6 billion, double the revised estimate of ₹3 billion in FY25, reflecting the government’s intent to accelerate green hydrogen production and infrastructure development. The budget highlights the importance of developing electrolyzer manufacturing capabilities and establishing hydrogen hubs to support large-scale industrial applications. Green hydrogen is expected to play a key role in decarbonizing industries such as steel, cement, and heavy transportation, with planned incentives for production and export.
Electric Vehicle and Battery Manufacturing Get Policy Support
The government has announced measures to strengthen domestic EV production and battery supply chains. The National Critical Minerals Mission, led by the Ministry of Mines, has been allocated ₹41 billion to secure essential raw materials for EV batteries and clean energy technologies. To lower production costs, Basic Customs Duty (BCD) has been removed on cobalt, lithium-ion battery scrap, lead, zinc, and other key materials. Additionally, the budget proposes initiatives for extracting critical minerals from mine tailings, which could create employment opportunities in mineral-rich states.
The Production-Linked Incentive (PLI) Scheme for Advanced Chemistry Cell (ACC)
Battery Storage has been increased from ₹1.54 billion to ₹15.58 billion, while the PLI scheme for Automobiles and Auto Components has been significantly raised from ₹34.69 billion in FY25 to ₹281.88 billion in FY26, reflecting the government’s goal of making EVs more affordable and self-reliant. To further boost clean energy manufacturing, the National Manufacturing Mission has been introduced. This initiative will focus on solar PV cells, EV batteries, wind turbines, and grid-scale battery storage, ensuring that Micro, Small, and Medium Enterprises (MSMEs) play a greater role in India’s clean energy transition.
Expanding Nuclear Power as Part of the Energy Transition
The Nuclear Energy Mission for Viksit Bharat aims to achieve 100 GW of nuclear power capacity by 2047. To encourage private investment, amendments to the Atomic Energy Act and Civil Liability for Nuclear Damage Act have been proposed, easing supplier liability provisions. The Department of Atomic Energy (DAE) has received ₹240 billion, with ₹200 billion earmarked for Small Modular Reactors (SMRs), targeting the deployment of five indigenous reactors by 2033. The government is also developing Bharat Small Reactors (BSRs), 220 MW Pressurized Heavy Water Reactors (PHWRs) designed for industrial use. These reactors will provide clean power for industries such as steel, aluminum, and metals, helping reduce emissions from high-energy sectors.
According to the PIB release, India is also working on high-temperature gas-cooled reactors for hydrogen production and molten salt reactors to utilize thorium reserves. The nuclear expansion plan includes:
• Increasing nuclear capacity from 8,180 MW to 22,480 MW by 2031-32.
• Commercial operation of the 700 MWe Kakrapar Atomic Power Station (KAPS-3 & 4).
• Advancements in the Prototype Fast Breeder Reactor (PFBR 500 MWe), which is set for core loading and further operational milestones.
• A 6 x 1,208 MW nuclear power project in Kovvada, Andhra Pradesh, in collaboration with the United States.
A Decisive Shift Toward Clean Energy
The Union Budget 2025-26 signals a major transformation in India’s energy sector, with higher investments in solar power, green hydrogen, EV manufacturing, and nuclear expansion. The focus on grid modernization, supply chain resilience, and infrastructure upgrades highlights the government’s intent to create a self-reliant clean energy ecosystem. However, successful implementation will depend on overcoming regulatory challenges, improving subsidy distribution, and strengthening public-private collaboration.
