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Energy Budget: Govt focuses on manufacturing competitiveness, clean energy supply chains

Energy Budget: Govt focuses on manufacturing competitiveness, clean energy supply chains


The Budget for FY26 reinforces India’s ambitions of becoming a manufacturing hub for clean energy products and services with increased policy support prioritising domestic manufacturing, backward integration, skilling and research & development (R&D).

Proposals such as the National Manufacturing Mission focus on production of electrolysers, wind turbines, solar cells, batteries and very high-voltage transmission equipment.

The rationalisation of tariffs on critical minerals and incentives for manufacturing Li-ion batteries are efforts that will strengthen supply chains as well as the domestic ecosystem helping to accelerate the shift towards e-mobility.

This emphasis on creating a circular economy with a robust manufacturing and consuming ecosystem for clean energy products and services aligns with one of the 10 areas of focus in the Budget for FY26—energy security.

Integrated approach

Commenting on the National Manufacturing Mission in her Budget speech, Finance Minister Nirmala Sitharaman said, “Given our commitment to climate-friendly development, the Mission will also support clean tech manufacturing. This will aim to improve domestic value addition and build our ecosystem for solar PV cells, EV batteries, motors and controllers, electrolysers, wind turbines, very high-voltage transmission equipment and grid scale batteries.”

Critical minerals are at the heart of the transition to clean energy with India continuing its thrust on expanding their supply chains.

The government has proposed to fully exempt cobalt powder and waste, the scrap of lithium-ion battery, Lead, Zinc and 12 more critical minerals. In FY24 budget, it had exempted basic customs duty (BCD) on 25 critical minerals.

The inclusion of 35 additional capital goods for EV battery manufacturing will boost domestic lithium-ion battery production. Besides, the government will come out with a policy for recovery of critical minerals from tailings in a boost to circular economy.

Abhijeet Sinha, Project Director at National Highways for Electric Vehicles (NHEV) said that funding to finance 25 per cent cost of bankable projects up to ₹10,000 crore for FY26 with ₹1.5 lakh crore additional interest-free loans and the Urban Challenge Fund have the potential to support e-mobility initiatives.

Besides, reduction in customs and duties complements the existing PLI schemes and will encourage backward integration, enabling Indian manufacturers to scale up operations efficiently, he added.

“However, missing Climate Financing outlays and a clear roadmap for expanding charging infrastructure limits the immediate impact on adoption,” Sinha said.

Besides, the parallel focus on strengthening electricity grid, including enhanced intrastate transmission capacity is critical.

Appreciating the continued focus on domestic manufacturing of generation and storage equipment, Sterlite Power Managing Director Pratik Agarwal said, “There is new-found mention of high-voltage transmission equipment. Given that there are global deficits in this product category, focusing on this sub-segment is a very sound move.”

Rajiv Ranjan Mishra, Managing Director at Apraava Energy pointed out that setting up a high-level committee for regulatory reforms to review all non-financial sector regulations, certifications, licenses, and permissions will help strengthen investments in power sector.

The government’s push to infrastructure development also supports the clean energy manufacturing ecosystem. For instance, the ₹1 lakh crore Urban Challenge Fund will also boost energy sector infra.

Lohum CEO Rajat Verma said that introduction of a comprehensive policy for critical minerals recovery from tailing boosts circular innovation.

Besides, the ₹20,000 crore investment in private-sector R&D for emerging technologies signals a transformative shift in building a sustainable critical minerals ecosystem, he added.

The ₹10,000 crore fund for startups will also help spur innovation in the clean energy sector. Besides, the additional borrowing of 0.5 per cent of GSDP to states for distribution sector reforms will help enhance grid security and stability.

Praveen Kakulte, CEO of Powercon Group, commended the strong focus on capacity building through five National Centres of Excellence in Skilling.





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