The Union Budget 2026 has provided a new focus to India’s renewable energy strategy, moving from capacity addition to developing a sustainable, resilient domestic clean energy ecosystem, with energy storage systems as the key pillar.

Industry stakeholders across the renewable energy value chain have broadly welcomed the government’s emphasis on battery energy storage systems (BESS) to manage intermittency and strengthen grid reliability.

In Budget 2026, the allocation for the solar sector rose to ₹305.39 billion (~$3.33 billion), up from ₹242.24 billion (~$2.64 billion) in the previous year.

Support for decentralized and rooftop solar also increased significantly. Funding for the Pradhan Mantri Krishi Urja Suraksha evam Utthaan Mahabhiyaan (PM-KUSUM) more than doubled to ₹50 billion (~$545.33 million) from ₹26 billion (~$283.57 million), while the allocation for the PM Surya Ghar: Muft Bijli Yojana increased to ₹220 billion (~$2.39 billion) from ₹200 billion (~$2.18 billion).

At the same time, the National Green Hydrogen Mission saw its allocation double from a revised outlay of ₹3 billion (~$32.72 million) in FY 2025–26 to ₹6 billion (~$65.44 million).

In contrast, funding for wind and other renewable energy programs remained unchanged at ₹5.5 billion (~$60.09 million), indicating a clear prioritization of solar-led growth in the near term.

Push for Solar Over Other Renewables

Despite the inherent intermittency of solar power, the Budget provided stronger support for solar than for other renewable sources, signalling a continued policy preference for solar-led growth.

Kalpesh Kalthia, CMD, Kosol Energie, noted that the Budget reflects more than 30% growth in targeted fiscal backing for solar deployment, grid integration, and decentralized energy projects.

Prashant Mathur, CEO, Saatvik Green Energy, added that the record ₹12.21 trillion (~$133.1 billion) capital expenditure outlay, coupled with a nearly 29% increase in funding for PM Surya Ghar, has created long-term demand visibility for the solar value chain. This clarity is vital for unlocking large-scale investments.

Shreya Mishra, CEO and Co-founder at SolarSquare, said that residential solar remains the biggest focus in India’s renewable energy push, with nearly 70% of the Ministry of New and Renewable Energy budget and ₹220 billion (~$2.39 billion) under PM Surya Ghar now dedicated to the residential solar segment. “As India’s energy needs grow, decentralized power will be critical, especially when transmission and distribution infrastructure cannot scale at the same pace.”

Pankaj Aggarwal, CFO, Kalpa Power, said that as the sector enters a phase of rapid scale-up, deeper structural reforms will be critical. He added that interventions in transmission and grid infrastructure, utility-scale energy storage financing, and GST rationalization are essential to strengthening project bankability and mitigating curtailment and integration risks.

The Budget 2026 also corrected inverted duty structures on semiconductors by raising customs duty on finished electronic goods, such as interactive flat panel displays, to 20%, while reducing duties on open cells and key components to 5% or nil.

Pawan Kumar Garg, Chairman and Joint Managing Director, Fujiyama Power Systems, welcomed the launch of India Semiconductor Mission 2.0, saying that enhanced support for industry-led research and development and manufacturing would strengthen India’s semiconductor ecosystem and global competitiveness.

Continued Focus on Manufacturing

For solar manufacturing, the exemption from Basic Customs Duty on sodium antimonate used in solar glass production was seen as a critical move to strengthen domestic supply chains.

D.V. Manjunatha, Founder and CMD at Emmvee Photovoltaic Power, said the sector’s focus is now clearly moving from incentives to execution. “For companies that have invested early in domestic solar manufacturing, this policy consistency provides long-term confidence and visibility. The emphasis is now on operational excellence, cost competitiveness, and building depth across the value chain.”

Echoing this view, Mathur said the exemption would improve cost competitiveness and accelerate capacity creation in a strategically vital segment.

He added that for manufacturers, this budget is a green light to scale to multi-GW capacities and invest in deep backward integration.

Manufacturers believe that continued policy support could position India as a credible China+1 manufacturing hub and a globally competitive, export-ready clean energy supplier.

Energy Storage Takes Center Stage

Energy storage emerged as one of the most consequential themes of Budget 2026. Developers and manufacturers welcomed the extension of Basic Customs Duty exemptions on capital goods used for manufacturing lithium-ion cells for batteries deployed in BESS projects.

Devansh Jain, Executive Director, INOXGFL Group, noted that sustained policy support for energy storage would be critical to strengthening grid stability and enabling large-scale integration of renewables. He noted that duty relief for lithium-ion cell manufacturing and key solar inputs will support the development of integrated clean energy value chains.

Siddharth Bhatia, Managing Director, Oyster Renewables and AB Energia, highlighted the importance of the government’s focus on rare-earth corridors and advanced manufacturing. According to him, securing domestic access to essential minerals is vital to scaling battery storage and power-electronics manufacturing.

Power Sector Reforms

Recognizing that generation-led growth must be matched by system-level reforms, the Budget announced measures to improve the financial health of power distribution companies.

The allocation for the reforms-linked distribution program increased to ₹180 billion (~$1.96 billion) from ₹160.2 billion (~$1.72 billion) in Budget 2025.

Shobit Rai, Co-Founder and Managing Director, Prozeal Green Energy, said incentivizing distribution reforms and augmenting intrastate transmission capacity would accelerate the adoption of advanced transmission infrastructure and energy storage systems.

The proposed restructuring of the Rural Electrification Corporation (REC) and Power Finance Corporation (PFC) was also welcomed by the industry.

Tanmoy Duari, CEO, AXITEC Energy India, said these changes would enhance financing capacity and unlock larger investment flows for renewable energy projects.

Rupal Gupta, Founder, Managing Director, and CEO at TrueRE Oriana Power, opined that the proposed restructuring of PFC and REC to improve credit velocity can further ease financing constraints for large, long-gestation clean energy projects.

Inclusion of CCUS

The Budget also expanded India’s decarbonization toolkit by proposing a Carbon Capture, Utilization and Storage (CCUS) program with an outlay of ₹200 billion (~$2.18 billion), aimed at hard-to-abate sectors such as power, steel, cement, and refining.

Rahul Munjal, Chairman and Managing Director, Hero Future Energies, said the inclusion of CCUS acknowledges the need for credible transition pathways alongside renewables.

However, industry leaders cautioned that clarity of execution will be key.

Rupal added that clearer frameworks for contracting, certification, monetization, and long-term offtake would be essential to make CCUS projects bankable and to attract private capital at scale.

Boost for EVs

The electric mobility ecosystem also received a boost, with 35 capital goods for electric vehicle (EV) battery manufacturing added to the duty-exempt list.

Uday Narang, Founder and Chairman at Omega Seiki Mobility, said the budget pushed for advanced manufacturing, AI-led technologies, the growth of the electronics and semiconductor sectors, and the expansion of rare-earth and battery supply chains.

He added that the ₹100 billion (~$1.09 billion) SME Growth Fund and higher public CAPEX are also expected to strengthen the EV ecosystem significantly.