Blockbuster Saturday: Power-Packed Budget 2025 

This budget strengthens India’s commitment to energy security and clean energy.

The Union Budget 2025, presented by Finance Minister Nirmala Sitharaman, has cheered the energy sector, with stocks rallying by 9 percent.

Moreover, with a sharp rupee depreciation and declining foreign exchange reserves, there is a focus on internalising the supply chain and reducing import dependence. While the Reserve Bank of India (RBI) recently announced plans to inject an additional Rs 1.1 lakh crore (US$12.7 billion) into the banking system through various measures and conducting a US$5 billion dollar-rupee swap auction to enhance liquidity, securing supply chains is key.

This budget strengthens India’s commitment to energy security and clean energy growth by prioritising domestic manufacturing, backward integration, skilling, and research and development (R&D).

Promoting Backward Integration

The budget provides game-changing indirect tax measures to bolster domestic manufacturing and electric vehicles (EVs) value chains for a sustainable future. To foster innovation and sustainable growth, it emphasizes building an entire ecosystem for solar PV cells, EV batteries, motors and controllers, electrolysers, wind turbines, very high voltage transmission equipment and grid-scale batteries. Now, 35 additional goods for EV batteries are exempt from duties, fostering indigenisation.

Critical minerals were big beneficiaries with an exemption of Basic Customs Duty (BCD) on cobalt powder, lithium-ion battery waste, lead, zinc and 12 others.

Increasing Access to Credit 

The proposed Public Private Partnership (PPP) model for infrastructure development, coupled with interest-free loans, will catalyse investments in clean energy. Further, the R&D outlay of Rs 20,000 crore (US$2.3 billion) substantially increased from previous years.

Grid infrastructure expansion and modernisation will be key to greater renewable energy integration. The budget proposes an outlay of Rs 1.5 lakh crore (US$17.3 billion) for infrastructure development, including 50-year interest-free loans to states for capital expenditures and incentives for reforms. It also pushes for power sector reforms, with additional borrowing of 0.5 percent of gross state domestic product (GSDP) allowed to states.

Accessing finance is challenging for micro, small and medium enterprises (MSMEs), making clean energy adoption less attractive. The European Union Carbon Border Adjustment Mechanism, coming into force in 2026, will be disadvantageous for them. The budget provides increased credit guarantee cover and customised credit cards for MSMEs and start-ups, encouraging them to adopt clean technologies and be part of innovative green energy solutions.

Focus on Nuclear

A Nuclear Energy Mission, with a dedicated Rs 20,000 crore (US$2.3 billion) outlay for the R&D of Small Modular Reactors (SMRs), has been announced. While the viability of such projects is not yet established, the government’s increased focus reveals India’s ambition for a reliable energy supply.

What is Missing?

Energy efficiency can help India avoid building large power plants and associated grid infrastructure. It can help achieve economic growth and create jobs while addressing the country’s energy security concerns and reducing import bills. However, its budget allocation is subpar.

With some misses, the budget lays a solid foundation for India’s energy transition, reflecting a commitment to sustainable development and environmental stewardship.