Union Budget 2025: Focusing on long-term energy security and domestic manufacturing

Review of last three budgets: Building on India’s green energy commitment

India’s clean energy transition roadmap has been significantly influenced by strategic budget announcements and allocations. 

Union Budget 2022 focused on domestic solar equipment manufacturing with an allocation of INR 19,500 crore to boost domestic manufacturing up to 45 GW. Consequently, the production linked incentive (PLI) for high-efficiency solar PV module manufacturing was allocated in two tranches for 24.2 GW capacities and overall 48.3 GW manufacturing capacities were allocated. As of December 2024, India reached an installed solar module manufacturing capacity of ~63 GW and solar cell manufacturing capacity of ~5.8 GW. 

In Union Budget 2023, viability gap funding (VGF) for 4 GWh battery energy storage system (BESS) was announced. This followed by multiple energy storage tender issuances offering VGF. The VGF support for BESS led to a competitive tariff discovery. In Ember’s latest analysis, BESS cost decline is identified as an important driver for reducing coal dependency and delivering 24/7 clean power. 

Additionally, an outlay of INR 19,744 crore was announced for the National Green Hydrogen Mission that aims to establish India as a global hub for green hydrogen production, usage, and export. Following this, strategic interventions for green hydrogen transition (SIGHT) schemes were launched to incentivise electrolyser manufacturing and green hydrogen production. Till date, tenders for 412,000 metric tons of green hydrogen production capacity and 1.5 GW electrolyser manufacturing capacity have been awarded under the SIGHT scheme.

Union Budget 2024 shifted focus to diversify the non-fossil fuel capacity beyond grid-scale solar and on-shore wind and announced financial support for development of offshore wind capacity offering VGF on the first 1 GW of offshore projects. This was followed by a tender announcement for a 500 MW offshore wind project on the coastlines of Gujarat. Ember’s analysis on wind growth in India also recommends that continued efforts are required to enable the deployment of offshore wind capacities, from a long-term perspective. 

This budget also focused on distributed renewable energy and announced the Subsidy on solar rooftop under PM Surya Ghar Muft Bijli Yojana for 10 million households, this contributed to the growth of rooftop solar to 15.7 GW as of December 2024. 

Also, a 100% exemption on basic customs duty (BCD) for 25 critical minerals was also announced. Additionally in January 2025, the Indian government approved the National Critical Mineral Mission to build a resilient value chain for critical mineral resources that are vital to green technologies, with an outlay of INR 34,300 crore over seven years. 

Union Budget 2025: Shifting the energy needle in the long run

Union Budget 2025 highlights efforts toward long-term energy security with plans to expand nuclear capacity to 100 GW by 2047, while emphasising domestic manufacturing of key components like solar PV cells, batteries, and wind turbines.

Clean-tech manufacturing

Budget 2025 recognises micro, small, and medium enterprises (MSMEs) as key drivers of India’s development journey. To support them, a National Manufacturing Mission has been announced, further strengthening the ‘Make in India’ vision with a budgetary allocation of INR 100 crore for 2025-2026. This mission aims to boost domestic production of solar PV cells, wind turbines, batteries, and electrolysers, emphasising India’s commitment to self-reliance and sustainable growth.

Critical minerals and recycling

The budget’s BCD exemption on cobalt powder, lithium-ion battery scrap, and other critical minerals aims to strengthen India’s recycling industry. By eliminating duties on key scrap materials, the government intends to lower costs for domestic secondary producers and encourage investments in critical mineral recycling. The budgetary allocation for the National Critical Mineral Mission for 2025-2026 is INR 410 crore.

Nuclear power

Building on India’s ongoing efforts to diversify its energy mix, Budget 2025 sets an ambitious target of adding at least 100 GW of nuclear capacity by 2047—a strategic move to strengthen long-term energy security and position nuclear energy as an alternative to supply baseload while reducing dependence on fossil fuels. However, this goal will require significant legislative reforms, particularly to enable private sector participation through amendments to the Atomic Energy Act and the Civil Liability for Nuclear Damage Act. The budgetary allocation for nuclear power projects for 2025-2026 is INR 2,086 crore.

Currently, India’s installed nuclear capacity stands at 8.2 GW, contributing around 2.6% overall generation in 2024. The announcement on operationalising five indigenously developed small modular reactors (SMRs) i.e. Bharat SMRs by 2033 came on top of planned 7 GW of nuclear capacity to be set up by 2031 in fleet mode. 

The two government agencies, the Nuclear Power Corporation of India Limited (NPCIL) and the Bhabha Atomic Research Centre (BARC) are central to India’s Nuclear Energy Mission. The NPCIL is responsible for operationalisation of projects, whereas BARC is responsible for research and development (R&D) and is developing the SMRs. SMRs are the advanced nuclear reactors with a power generation capacity ranging from 30 MW to 300+ MW, providing a flexible, scalable, and cost-effective alternative to conventional large nuclear reactors.

In conclusion, despite the forward-looking directions in the budget, from a short-term perspective and priorities, the budget has not explicitly dealt with the expectations on continued support for wind energy, transmission infrastructure and energy stoarge, green hydrogen and industrial decarbonisation.

Acknowledgement

Cover photo

Birds-eye view of the 1000 MW Gujarat Solar Park, in Gujarat, India.

Credit: Ashley Cooper / Alamy Stock Photo