Budget 2026: Renewable energy sector welcomes continued long-term growth-oriented policy support

The renewable energy sector received a slew of long-term growth-oriented incentives from Union Finance Minister Nirmala Sitharaman in the Union Budget 2026-27.

In the Budget speech, she proposed to extend the basic customs duty exemption given to capital goods used for manufacturing Lithium-Ion Cells for batteries to those used for manufacturing Lithium-Ion Cells for battery energy storage systems (BESS). She also reduced Basic Customs Duty (BCD) on sodium antimonate for use in the manufacture of solar glass from 7.5% to nil. Similarly, BCD on all goods used for the generation of nuclear power, Control and Protector Absorber Rods, Burnable Absorber Rods for the generation of nuclear power, were also reduced from 7.5% to nil.

''The continued policy support for battery energy storage systems, including customs duty exemptions for lithium-ion cell manufacturing, along with duty relief for key solar manufacturing inputs, will play a critical role in strengthening grid stability and accelerating large-scale renewable integration,'' said Devansh Jain, Executive Director, INOXGFL Group. These measures are particularly relevant for developers and manufacturers working to build end-to-end domestic clean-energy value chains, he added.

The Budget makes it cheaper and easier for India to build domestic manufacturing for strategic and export‑oriented products like batteries, semiconductor chips, garments, and apparels. Its focus on critical minerals, carbon capture and utilisation, and next‑generation nuclear technologies marks a decisive push into the energy‑transition future'', said Sumant Sinha, Founder, Chairman & CEO, ReNew.

''On the tax front, exemptions for battery energy storage systems, lithium-ion cells, solar-glass inputs and biogas-blended CNG materially improve project viability. Collectively, these measures are likely to compress project costs, unlock private capital, and accelerate deployment of storage-backed renewables, while the restructuring of PFC and REC could improve credit flow and execution discipline across the power sector," says Raju Kumar, Partner and Energy Tax Leader, EY India.

''We welcome the focused support for domestic lithium-ion cell manufacturing, energy storage, and critical minerals, which are essential for reducing import dependence. The Budget strengthens confidence for manufacturers investing in advanced technologies and positions India well to emerge as a global hub for sustainable and future-ready manufacturing,” said Jayadev Galla, Chairman and Managing Director of Amara Raja Energy & Mobility Limited.  

''The Union Budget 2026–27 directly address structural cost and capability challenges within the storage manufacturing ecosystem'', says Rishi Srivasatava, Co-founder of Offgrid Energy Labs.

BESS significantly enhances the viability of solar power by addressing its intermittency and enabling efficient energy management, as it stores excess solar generation for use during low-production periods, thereby augmenting overall system reliability and economics in the solar industry, notes Chandra Kishore Thakur, Global CEO, Sterling and Wilson Renewable Energy Group, while welcoming the Union Budget.

The Budget also announced a ₹20,000-crore carbon capture and utilisation (CCUS) allocation for hard-to-abate sectors.  ''For sectors such as steel, cement, refining and chemicals, CCUS is an essential enabler of emissions reduction while protecting competitiveness, investment, and jobs and the priority now should be to translate this intent into buildable projects by focusing on shared CO₂ transport and storage infrastructure, early-mover risk support, commercial scale projects and clear rules for measurement, transport access and long-term liability'', said Atanu Mukherjee, President & CEO Dastur Energy.

 In carbon-intensive industries such as steel, cement and refining, CCUS would enable deep emissions reduction while also unlocking emerging pathways like green methanol for shipping and chemicals. Scaling CCUS readiness levels from pilots to commercial deployment, backed by clear regulation and market incentives, will be critical for success.” says Sanchit Makhija, Partner at Kearney.

The proposed incentivisation of electricity distribution reforms and augmentation of intra-state transmission capacity will accelerate the adoption of advanced transmission infrastructure and energy storage systems, says Shobit Rai,  Co-Founder & Managing Director,  Prozeal Green Energy. These measures are designed to strengthen the financial health and operational capacity of electricity companies and states will be allowed additional borrowing of 0.5 percent of GSDP, contingent upon implementing these reforms, he said.

As data centres emerge as a key driver of India’s digital and manufacturing economy, the need for reliable, round-the-clock clean power will only intensify. In this context, customs duty exemptions for battery storage and solar manufacturing inputs will play a vital role in scaling firm renewable energy solutions that support both energy security and sustained economic growth,  says Siddharth Bhatia, Managing Director, Oyster Renewables & AB Energia.

''By easing cost pressures on critical raw materials and encouraging deeper localisation, the Budget reinforces investor confidence and supports innovation and scale-up across solar manufacturing and allied clean energy technologies. At a time of ambitious capacity targets and rapidly evolving market dynamics, these targeted interventions will enhance the economic viability of solar deployment and accelerate India’s transition to a resilient, affordable, and sustainable energy future,.” says Karthik Raju, Executive Director, Atria Renewable.

The exclusion of the entire value of biogas from the Central Excise duty on biogas-blended CNG is a meaningful step that improves the commercial viability of waste-to-energy projects and encourages cleaner fuel adoption, according to  Amit Badlani, Director, Vihaan Clean & Green Tech.

Budget 2026’s decision to exclude the biogas component from excise duty calculations on blended CNG is a decisive demand-side signal, says Vivek Rahi, Partner and Head, Oil and Gas, KPMG in India. He notes that from just 34 operational plants in 2020, India crossed 170 functional CBG plants by end-2025, with nearly 300 more under construction. Installed capacity is set to grow significantly, and credible forecasts point to a seven-fold expansion by 2030.  The SATAT initiative addressed the sector’s original fault lines of offtake risk and price uncertainty through assured procurement by oil marketing companies, floor pricing and long-term contracts.