As the Finance Ministry prepares the Union Budget for 2026-27, or Budget 2026, the focus must shift from volume to value. To achieve Viksit Bharat 2047, we can no longer afford to be a nation that assembles its green future.
India’s energy narrative is currently defined by a jarring paradox. We have sprinted past the 250 GW renewable energy milestone—now accounting for over 50% of our total installed capacity—yet our energy security remains tethered to external supply chains and an aging grid.
Budget 2026 must be the blueprint for energy sovereignty.
1. Breaking the Solar Assembly Trap: Upstream PLI
While we celebrate our installation speed, India still relies on imports for approximately 90% of solar cells and nearly 100% of the processed minerals required for batteries. This is an assembly trap that leaves our energy targets vulnerable to global price volatility and trade protectionism.
We propose that Finance Minister Nirmala Sitharaman should introduce a deep-tech PLI exclusively for ingot and wafer manufacturing. We must set a target of 30 GW of annual ingot-to-wafer capacity by 2028. By owning the wafer, India gains the resilience to control its own energy costs and explore export markets in Africa and the Middle East, where we are currently uncompetitive.
2. Decarbonizing the Export Engine: The Carbon Market Remedy
Energy is the primary input for India’s heavy industries. With the EU’s Carbon Border Adjustment Mechanism (CBAM) turning from a reporting requirement into a fiscal barrier, our energy-intensive exports (steel, aluminum, and cement) are at risk. Our steel currently carries a carbon footprint nearly double that of the EU average.
Budget 2026 must accelerate the India Carbon Market (ICM). By ensuring domestic carbon credits are internationally fungible and recognized by global trade blocs, we can prevent an estimated $2–3 billion in annual carbon tax from leaving our shores, reinvesting that capital instead into domestic green hydrogen and industrial electrification.
3. Solving Transmission Bottlenecks: Technology, Finance, and Stability
India’s energy transition faces a critical technical wall at the transmission level. Our grid relies on the mechanical inertia of coal and hydro plants to maintain frequency stability. Rapidly integrating intermittent renewables erodes this inertia, increasing the risk of frequency trips and blackouts.
Beyond technical instability, the sector is hampered by fragmented technology adoption and financing gaps for high-capacity long-distance lines. While DISCOM debt restricts liquidity, the transmission network remains caught in an intermittency trap. We cannot safely retire coal plants until green energy is sufficiently firm to ensure grid reliability.
To address this, the budget must rationalize GST on battery energy storage systems (BESS) to 5% and establish a Green Firming Framework. Transitioning the policy focus from variable power to round-the-clock (RTC) power is essential. By deploying BESS as virtual synchronous machines, we provide the synthetic inertia necessary to stabilize the national grid. This ensures green energy can reliably power industrial hubs while maintaining a resilient, rock-solid transmission infrastructure.
4. Financing the Blue Economy: Sovereign Blue Bonds
India’s 7,500 km coastline is a massive, untapped energy frontier. Offshore wind offers higher capacity factors than onshore, but the real value lies in green ammonia. By converting offshore wind energy into ammonia, India can create a zero-carbon fuel for global shipping and a sustainable feedstock for our fertilizer industry, effectively exporting our wind energy in liquid form. However, the high cost of domestic commercial debt often makes these capital-intensive maritime projects unviable.
We propose the launch of sovereign blue bonds with tax-free status for retail investors. By offering a tax-exempt instrument, the government can attract low-cost domestic capital, effectively lowering the interest burden for developers by 2-3%. Dedicated strictly to offshore wind and green port infrastructure, these bonds would bridge the viability gap for India’s maritime energy targets without putting undue strain on the commercial banking sector.
5. Bridging the Private Capital Gap: Credit Enhancement
Currently, most Indian renewable projects are rated BBB due to the weak financials of the DISCOMs that buy the power. This rating ceiling prevents large-scale global pension funds from investing.
The budget 2026 should seed a $1 billion green credit enhancement fund (GCEF). This fund would provide partial credit guarantees to projects, uplifting their ratings. This is the most efficient use of taxpayer money—moving the needle from direct government funding to mobilizing trillions in private global capital.
Our take:
Budget 2026 cannot afford to be an exercise in incrementalism or strategic surrender. While the 250 GW milestone is a historic achievement, it remains a fragile one—an expensive trophy if the technology and the infrastructure supporting it are not domestic assets. To survive the shifting sands of global trade and the technical demands of a high-renewables grid, India must pivot its fiscal philosophy. We must stop merely subsidizing the energy output and start owning the core infrastructure.
Securing our energy future requires a two-front assault: gaining control of the silicon supply chain through upstream manufacturing and hardening our transmission network with grid-scale storage. If Budget 2026 does not prioritize the ownership of these critical assets—from the wafer to the wire—we risk a future where we are forever paying for someone else’s infrastructure. The choice for the Finance Minister is clear: invest in sovereignty today, or remain a customer of global supply chains tomorrow.
