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Union Budget 2025-26: Key Energy Sector Reforms and Investments

The Union Budget 2025-26 lays out a comprehensive strategy to strengthen India's energy sector, prioritizing nuclear energy, power sector reforms, clean technology manufacturing, critical minerals, and battery production. These initiatives aim to accelerate India's transition to a cleaner, self-reliant, and technologically advanced energy ecosystem.

1. Nuclear Energy Expansion

Recognizing nuclear energy as a key pillar of India’s clean energy transition, the government has set an ambitious target of achieving 100 GW of nuclear power capacity by 2047. To facilitate this:

• Amendments to the Atomic Energy Act and Civil Liability for Nuclear Damage Act will encourage private sector participation in nuclear energy.
• A Nuclear Energy Mission is being launched with a Rs20,000 crore allocation for research and development in Small Modular Reactors (SMRs).
• The plan aims to operationalize five indigenous SMRs by 2033, enhancing India’s nuclear infrastructure.

2. Power Sector Reforms

To improve the financial viability and efficiency of electricity distribution companies (DISCOMs), the budget includes:

• Incentives for electricity distribution reforms to improve financial health and service reliability.
• Investment in intra-state transmission capacity to ensure better electricity availability.
• States will be allowed to borrow an additional 0.5% of their Gross State Domestic Product (GSDP), contingent on implementing power sector reforms.

3. Boosting Clean Technology Manufacturing

To support India's clean energy self-reliance and manufacturing sector, the government has introduced a Manufacturing Mission that includes:

• Increasing domestic production of solar PV cells, EV batteries, motors, controllers, electrolyzers, wind turbines, and high-voltage transmission equipment.
• Enhancing technological advancements and scaling up manufacturing capacity to reduce reliance on imports.

4. Critical Minerals Policy

To secure essential raw materials and reduce dependence on imports, the budget outlines:

• A full exemption from Basic Customs Duty (BCD) on 25 critical minerals that are not available domestically.
• Specific duty exemptions on cobalt powder, lithium-ion battery scrap, lead, and zinc, supporting domestic battery and clean energy technology production.
• A new policy for recovering critical minerals from mining tailings, ensuring sustainable resource utilization.

5. Strengthening Lithium-Ion Battery Production

India’s battery manufacturing capacity will receive a significant boost through:

• Incentives for domestic production, including the addition of 35 capital goods for EV battery manufacturing and 28 for mobile battery production.
• Strengthening India’s supply chain for energy storage solutions, particularly for EVs and renewable energy integration.

6. Tariff Reductions to Support Clean Energy

To make clean energy more affordable and improve industry competitiveness, the budget has reduced:

• Customs duty on solar cells from 25% to 20%, making solar installations more cost-effective.
• Duties on smart meters from 25% to 20%, encouraging greater adoption of digitalized energy management systems.