The Budget 2025-26 marks a decisive shift in India’s energy strategy, marking a departure from an emphasis on renewable energy (RE). While the government had previously championed solar and wind power as the cornerstones of its energy transition, this year’s budget prioritises nuclear energy and domestic critical mineral production over traditional renewable sources.
While the emphasis on domestic manufacturing continues by ensuring a reduction in taxes for solar photovoltaic (PV) and wind energy components, a direct benefit in terms of prioritising the RE-led transition is absent. This shift raises three major concerns about India’s climate ambitions and commitments.
Firstly, the objective to sequentially phase out coal from India’s energy basket would compromise. Secondly, the overarching idea of diversifying the energy sector by integrating the renewable avenues seems to have taken a backstage and lastly, while this Budget clearly shows that the government is pivoting towards nuclear power generation, the sheer feasibility of an ambitious 100 GW nuclear capacity roadmap by 2047 is debatable.
The government’s push for nuclear energy is reflected in the announcement of the Nuclear Energy Mission, which envisions adding 100 GW of nuclear power by 2047.
To facilitate this, the Budget proposes amendments to the Atomic Energy Act and the Civil Liability for Nuclear Damage Act, allowing private sector participation.
Additionally, the government has allocated Rs 20,000 crore for the research and development of Small Modular Reactors (SMRs), a technology that promises safer and more efficient nuclear power generation.
This shift to nuclear energy is being positioned as a solution to India’s baseload power requirement, given the intermittent nature of solar and wind energy.
However, nuclear energy comes with its own set of challenges. The Budget does not address key challenges such as land acquisition, public resistance, waste disposal and long project timelines. India’s past nuclear projects have faced delays and cost overruns, making the 100 GW target seem a far-fatched ambition.
Also since the push towards RE has been dominant since the last decade, how the market trends shape to such decisive changes will be significant in supporting the energy transition.
Despite its ambitious nuclear push, the Budget makes no mention of coal retirement unlike the previous budgetary announcements where it was stated a phase-out strategy shall be emphasised. With coal still accounting for over 50 per cent of India’s power generation, the absence of a phase-out strategy raises doubts about the government’s decarbonisation plans.
The reality is that even with an aggressive nuclear and renewable energy expansion, coal is projected to generate 56 per cent of India’s power needs by 2030.
The government had an opportunity to incentivise the retirement of inefficient thermal plants and promote cleaner alternatives but it has instead opted for a nuclear-led diversification strategy.
Without a deliberate and defined coal phase-out plan, India’s transition to clean energy remains uncertain, and its emissions reduction targets could be at risk.
While the Budget does not explicitly neglect renewable energy, the focus has clearly shifted towards domestic manufacturing rather than aggressive capacity additions. A National Manufacturing Mission has been announced to boost domestic production of solar PV cells, EV batteries, wind turbines and grid-scale batteries. This is important in supporting RE led transition since clean energy technologies are heavily reliant on such critical minerals, and having a secure, stable and reliable domestic supply chain will be the tantamount ahead.
To support this, the Budget includes customs duty exemptions on 35 capital goods for EV battery manufacturing and 28 for mobile phone battery production. It also reduces solar module import duties from 40 per cent to 20 per cent, making it cheaper to import components for solar projects.
However, this contradicts the government’s previous stance on boosting domestic solar manufacturing through high import tariffs. It will have to be further analysed as to how this impacts the current production linked incentives (PLI) schemes in Solar PV and Advanced Chemistry Cells (ACC) in India.
The focus on green hydrogen and electrolysers is another key element. The government plans to incentivise electrolyser production through policy support, aiming to position India as a leader in hydrogen technology. However, hydrogen remains at a nascent stage globally, and its large-scale adoption is still years away. The previously announced National Hydrogen Mission relies heavily on green energy (to qualify as green hydrogen), and a shift towards nuclear shall also require redefining standards for the green hydrogen ecosystem towards pink or hydrogen obtained via nuclear reaction based electricity.
The Budget acknowledged the importance of critical minerals such as lithium, cobalt, and rare earth elements (lanthanide series), essential for clean energy technologies. To ensure domestic availability, the government has announced full customs duty exemptions on the import of cobalt powder, lithium-ion battery scrap, and waste of critical minerals like lead and zinc. This move is expected to lower costs for manufacturers and promote recycling.
Additionally, the Budget introduces a policy for recovering critical minerals from mining waste, a step towards reducing dependency on imports. However, it remains to be seen whether domestic processing capacity can be scaled up quickly enough to meet the demands of the EV and renewable energy industries.
Infrastructure and Financing for Clean Energy
The Budget also prioritises infrastructure and investment to support clean energy expansion. Key measures include:
Urban Challenge Fund ( Rs 1 lakh crore): To finance sustainable urban development, including renewable energy installations and energy-efficient buildings.
DISCOM Reforms: States will be allowed additional borrowing of 0.5 per cent of Gross State Domestic Product (GSDP) if they implement electricity distribution reforms and improve intra-state transmission capacity, and address governance challenges in their operations.
The government’s pivot towards nuclear energy is ambitious but fraught with challenges. The lack of clarity on safety measures, waste disposal, and community engagement could lead to strong public resistance. Moreover, the long gestation period of nuclear projects means that even if executed as planned, nuclear energy will not contribute significantly to India’s energy mix in the short term.
The silence on coal retirement is another major concern. Without a clear phase-out plan, coal will continue to dominate India’s power sector, undermining the country’s climate commitments.
The neglect of key RE programs like PM KUSUM (for solarising agriculture), wind repowering, and rooftop solar further highlights the reduced emphasis on decentralised renewable energy expansion. While domestic manufacturing incentives are welcome, they do not directly translate to faster renewable energy deployment, also complementary issues such as development of energy transmission and distribution infrastructure for long distance energy transmission was missing. The need for long-distance transmission will also be required even if the energy source is shifted from RE to Nuclear.
In conclusion, Budget 2025-26 marks a strategic shift in India’s energy policy, with nuclear energy taking precedence over renewable expansion. While the push for nuclear and critical minerals reflects a long-term vision for energy security, the lack of focus on coal phase-out, immediate renewable energy capacity expansion, and storage solutions raises concerns about India’s non-fossil goals.
If the government truly intends to transition to clean energy, it must balance its nuclear ambitions with a robust renewable strategy. Otherwise, the risk remains that India will continue relying on coal while waiting for nuclear energy to become a reality — a costly and unsustainable path for the future.