As the Government of India prepares to present the Union Budget for 2025-26, expectations are high across industries and sectors. With the Ministry of Environment, Forests, and Climate Change (MoEFCC) projected to receive a budgetary allocation of INR 40 billion—a 3% increase over the previous year—there is a strong push for policies and financial support that align with India’s ambitious net-zero targets. This budget presents a unique opportunity to address critical areas such as renewable energy, decarbonization of industries, sustainable mobility, and community-level environmental projects. There are many expectations from various stakeholders as India moves toward a sustainable and inclusive green economy.
Strengthening the renewable energy transition
Renewable energy remains a cornerstone of India’s green energy transition. With the government’s commitment to achieving 500 GW of non-fossil fuel capacity by 2030, industry leaders are anticipating increased investments in solar, wind, and hydroelectric power projects. Enhanced funding for renewable energy infrastructure—including grid modernization and storage solutions—is expected to create a more resilient energy ecosystem.
The budget should support emerging technologies such as offshore wind energy and floating solar projects, which have immense potential but require significant initial investment. Expanding subsidies for residential and commercial solar installations, along with incentives for adopting battery energy storage systems (BESS), can further accelerate the renewable energy transition. The government’s focus on decentralizing renewable energy systems for rural electrification is also anticipated to receive a significant boost.
A balanced energy policy from NITI Aayog
A key expectation from the 2025-26 budget is the introduction of a balanced energy policy, spearheaded by NITI Aayog, that integrates environmental sustainability with economic growth and employment generation. Such a policy could provide a roadmap for industries to transition from high-carbon to low-carbon operations without jeopardizing economic development.
The policy is expected to outline strategies for managing India’s energy transition, particularly in coal-dependent regions. Measures to support workers and communities impacted by the shift away from coal are critical to ensuring a just transition. Financial and technical assistance for quick skill development of workforces is essential for adoption of clean technologies across the sectors. .
Expanding the scope of production-linked incentive (PLI) schemes
The Production Linked Incentive (PLI) scheme has been instrumental in boosting manufacturing across sectors. To align with India’s net-zero goals, the government should expand PLI incentives to industries critical for supply chain decarbonization.
Sectors like energy storage, electric vehicle (EV) components, green hydrogen production, and carbon capture technologies stand to benefit significantly from targeted PLI schemes. Encouraging domestic manufacturing of green hydrogen electrolyzers, for instance, can reduce dependency on imports and make India a global leader in hydrogen economy technologies.
Introducing a PLI scheme for industries like textiles, chemicals, and pharmaceuticals—which contribute significantly to greenhouse gas (GHG) emissions—can incentivize the adoption of sustainable practices and technologies across the supply chain.
Incentivizing the Green Hydrogen economy
Green hydrogen (GH2) is poised to play a pivotal role in decarbonizing hard-to-abate sectors like steel, cement, and chemicals. The 2025 budget could introduce financial incentives and tax breaks for companies investing in green hydrogen projects.
The creation of a Green Hydrogen Fund, supported by both public and private investments, can facilitate large-scale adoption of hydrogen technologies. Subsidies for developing hydrogen storage and distribution infrastructure, as well as funding for R&D in hydrogen production efficiency, are expected to be key focus areas. These measures will not only bolster India’s global position in the hydrogen economy but also contribute significantly to achieving net-zero targets.
Broadening mobility solutions
India’s mobility sector has seen remarkable growth in EV adoption, particularly for four-wheelers and larger two-wheelers. However, there is a significant gap in catering to the needs of everyday commuters who rely on bicycles and smaller vehicles. Electrically motorized bicycles and e-bikes can serve as affordable and eco-friendly alternatives, especially in urban and semi-urban areas.
The 2025 budget could introduce subsidies or incentives for manufacturing and purchasing electrically motorized bicycles, fostering innovation in this segment. Such measures can improve first- and last-mile connectivity while contributing to decarbonization efforts.
Moreover, with the gradual phase-out of EV subsidies, the industry is looking forward to alternative policies to sustain momentum in clean mobility adoption. These could include interest-free loans, tax rebates, or incentives for setting up EV charging infrastructure in underserved areas.
Supporting sustainable agriculture and water conservation
Agriculture accounts for a significant portion of India’s GHG emissions, and addressing this challenge requires a multi-faceted approach. The budget is expected to prioritize sustainable agricultural practices, including the promotion of climate-resilient seeds and organic farming techniques.
Financial support for precision agriculture tools, drip irrigation systems, and soil health improvement initiatives can help reduce emissions and improve productivity. Additionally, measures to address water scarcity—such as funding for water recycling, rainwater harvesting, and efficient irrigation systems—are crucial to ensuring long-term agricultural sustainability.
Indigenous technology for thermal power plants
India’s thermal power sector is a significant contributor to GHG emissions. The adoption of indigenous Advanced Ultra Super Critical (AUSC) technology can enhance efficiency and reduce emissions from coal-based power plants.
The 2025 budget could allocate funds for the deployment of AUSC technology across existing and new thermal power plants. This move would not only reduce emissions but also set benchmarks for efficiency in the global thermal power sector. Encouraging private sector participation in developing and implementing AUSC technology could further accelerate this transition.
Focus on RE based clean cooking and Article 6.4
The government’s decision to include clean cooking technologies powered by renewable energy in the Article 6.4 list under the Paris Agreement is a commendable step toward promoting community-level carbon reduction projects. It can significantly reduce household emissions, particularly in rural areas, while improving indoor air quality and public health.
The 2025 budget could allocate additional resources to expand the reach of clean cooking programs and incentivize the development of more efficient models. Broader inclusions of such community-level projects in the Article 6 framework can help India leverage carbon market opportunities while addressing grassroots environmental challenges.
Supporting Micro and Small Enterprises (MSEs)
Micro and small enterprises are critical to India’s economic growth but often lack the resources to adopt cleaner energy sources. The budget is expected to introduce financial assistance programs, including low-interest loans and subsidies, to help MSEs transition to renewable energy.
Simplifying access to carbon market instruments can enable these enterprises to monetize their emission reductions, providing an additional revenue stream. Capacity-building programs for MSEs on energy efficiency and carbon accounting could also play a vital role in driving widespread adoption of sustainable practices.
The Way Ahead
The 2025-26 Union Budget has the potential to be a defining moment in India’s journey toward a net-zero economy. By addressing key areas such as renewable energy, green hydrogen, sustainable mobility, and community-level projects, the government can create a robust framework for decarbonization.
Policies that balance environmental sustainability with economic growth and inclusivity will be critical to achieving long-term success. With targeted investments, innovative solutions, and a commitment to global standards, the 2025 budget can propel India into a leadership position in the global green economy. The industry and stakeholders await bold and visionary measures to shape a sustainable and prosperous future for the country.
The views and opinions expressed in this article are the author’s own, and do not necessarily reflect those held by pv magazine.
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