The Budget 2025-26 marks a pivotal shift in India’s energy strategy, moving away from an emphasis on renewable energy (RE) and focusing more on nuclear energy and domestic critical mineral production. While the government continues to prioritize domestic manufacturing, including reducing taxes on solar and wind energy components, there is no direct support for expanding RE capacity. This shift raises concerns about India’s climate goals, as it may delay efforts to phase out coal, diversify the energy mix, and achieve ambitious renewable energy targets.
Nuclear Energy Ambitions and the Ongoing Coal Challenge
The government’s push for nuclear energy is reflected in the proposed Nuclear Energy Mission, which aims to add 100 GW of nuclear power by 2047. As part of this initiative, amendments to the Atomic Energy Act are proposed, alongside an allocation of Rs 20,000 crore for the research and development of Small Modular Reactors (SMRs), which promise safer and more efficient nuclear energy. Nuclear energy is seen as a potential solution to India’s baseload power requirements, especially given the intermittent nature of solar and wind energy. However, the feasibility of reaching such a large capacity remains uncertain. Challenges such as land acquisition, public resistance, waste disposal, long project timelines, and India’s history of delays in nuclear projects further cast doubt on whether this ambitious target can be achieved.
The absence of a coal phase-out plan in this Budget is particularly troubling, as coal continues to account for over 50% of India’s power generation. Despite the government’s focus on nuclear and renewable energy, coal is projected to still generate 56% of India’s power needs by 2030. Without a clear strategy for retiring inefficient thermal plants, the country’s decarbonization efforts are at significant risk.
Domestic Manufacturing Boost and Critical Minerals for Clean Energy
The Budget also focuses on bolstering domestic manufacturing of solar PV cells, EV batteries, wind turbines, and grid-scale batteries. While this is important for ensuring a reliable clean energy supply chain, the reduced import duties for solar modules and the pivot from high tariffs on imports may disrupt the government’s previous push for domestic manufacturing. Furthermore, the promotion of green hydrogen through electrolyser incentives is another step towards clean energy, though large-scale adoption of hydrogen remains years away.
Critical minerals such as lithium and cobalt, essential for clean energy technologies, are also highlighted in the Budget. The government has announced full customs duty exemptions for the import of certain critical minerals to encourage recycling and domestic availability. However, questions remain about whether India can scale up processing capacities fast enough to meet the growing demand from the EV and renewable industries.
Infrastructure Investments and Gaps in Energy Transmission
The Budget includes infrastructure investments like the Rs 1 lakh crore Urban Challenge Fund and reforms in electricity distribution, but fails to provide clear solutions for energy transmission, especially long-distance transmission needed for nuclear and renewable energy.
Summary:
The 2025-26 Budget shifts India’s energy strategy, prioritizing nuclear energy and domestic critical mineral production over renewable energy. While nuclear ambitions include a 100 GW target by 2047, the absence of a coal phase-out plan and unclear transmission solutions raise concerns. The Budget also focuses on manufacturing and critical minerals for clean energy.
