The Union Budget 2025-26 has introduced a series of measures – spanning power sector reforms, nuclear energy development, clean technology manufacturing, lithium-ion battery production, and tariff reductions, alongside a significant increase in budgetary allocations for the Ministry of Power and the Ministry of New and Renewable Energy.
Power sector reforms
The government will incentivise electricity distribution reforms, support intra-state transmission capacity expansion, and allow states an additional 0.5 per cent of their GSDP in borrowing contingent on implementing these reforms. The Revamped Distribution Sector Scheme, with an outlay of Rs 3,037.58 billion, aims to reduce Aggregate Technical and Commercial (AT&C) losses to 12-15 per cent and eliminate the Average Cost of Supply (ACS) and Average Revenue Realized (ARR) gap by 2024-25. Additionally, performance-based funding and prepaid smart metering under the public-private partnership (PPP) model will be introduced to enhance financial and operational stability, along with special provisions for agricultural electricity supply under the PM-KUSUM scheme.
Nuclear energy development
The government has set a target of 100 GW of nuclear power capacity by 2047 and will amend the Atomic Energy Act and the Civil Liability for Nuclear Damage Act to facilitate private sector participation. A Nuclear Energy Mission with an allocation of Rs 200 billion will support research and development in small modular reactors (SMRs), with at least five indigenously developed SMRs expected to be operational by 2033.
Renewable energy and clean tech manufacturing
A Manufacturing Mission will drive clean technology production, focusing on solar PV cells, EV batteries, motors, controllers, electrolysers, wind turbines, and high-voltage transmission equipment. Furthermore, full exemptions from basic customs duty on 25 critical minerals, including cobalt powder and lithium-ion battery scrap, will support domestic manufacturing.
Lithium-ion battery production
The government will incentivise domestic lithium-ion battery production by expanding the list of capital goods eligible for customs tax exemptions. The government has added 35 capital goods for EV battery manufacturing and 28 for mobile battery production in this list, ensuring a steady supply chain for India’s growing clean energy and electric mobility sector.
Tariff reductions
To improve affordability and competitiveness in the clean energy sector, customs duty on solar cells has been reduced from 25 per cent to 20 per cent, while duties on smart meters have also been lowered from 25 per cent to 20 per cent, encouraging wider adoption and cost-effective energy solutions.
Budgetary allocation
For 2025-26, the Ministry of Power has been allocated Rs 218.47 billion, up from Rs 205.02 billion in 2024-25, while the Ministry of New and Renewable Energy’s allocation has increased to Rs 265.49 billion from Rs 191 billion.
