Budget 2025: A Boost for Clean Tech and Energy Sector- Analysis by Ramesh Shivanna

The Union Budget 2025 has laid a strong foundation for India's clean energy transition, reinforcing the government’s commitment to sustainability and self-reliance in clean technology. Several key initiatives and policy measures have been introduced to promote clean tech manufacturing, power sector reforms, nuclear energy expansion, and domestic value addition in critical technologies.

Clean Tech Manufacturing: Strengthening Domestic Capabilities

India’s clean energy ambitions have received a major push through targeted support for clean tech manufacturing. The government aims to enhance domestic value addition and build a robust ecosystem for manufacturing solar PV cells, EV batteries, motors and controllers, electrolyzers, wind turbines, high-voltage transmission equipment, and grid-scale batteries. This move is expected to reduce import dependency, create jobs, and establish India as a global clean tech manufacturing hub.

Power Sector Reforms: Strengthening Distribution and Transmission

A well-functioning power sector is crucial for India’s clean energy transition. The Budget 2025 introduces incentives for electricity distribution reforms and intra-state transmission augmentation. States will be allowed an additional borrowing of 0.5% of their Gross State Domestic Product (GSDP), provided they undertake these reforms. This will enhance the financial viability of electricity companies, ensuring more efficient and resilient power distribution across the country.

However, despite these measures, most transmission and distribution companies in various states continue to operate at a loss. Addressing these financial issues requires a more comprehensive approach, including performance-based efficiency improvements, reduction of transmission losses, and full digitalization of operations and maintenance. A targeted strategy focusing on these areas would ensure a healthier and more sustainable power sector across India.

Nuclear Energy Mission: A Step Towards Viksit Bharat 2047

Recognizing nuclear power as a key element of India’s energy mix, the budget sets a target of developing at least 100 GW of nuclear energy by 2047. Amendments to the Atomic Energy Act and the Civil Liability for Nuclear Damage Act will facilitate private sector participation, encouraging investment and innovation.

A Nuclear Energy Mission has been announced with an outlay of ?20,000 crore for research and development of Small Modular Reactors (SMRs). The goal is to operationalize at least five indigenously developed SMRs by 2033. SMRs hold great promise for India’s energy security, offering scalable, efficient, and low-carbon power generation.

Support to Domestic Manufacturing and Value Addition

To further strengthen India's position in battery technology, 35 additional capital goods for EV battery manufacturing and 28 for mobile phone battery manufacturing have been exempted from customs duties. This move will enhance domestic production of lithium-ion batteries, reducing costs and fostering self-reliance in energy storage technologies. However, it remains unclear whether this exemption extends to energy storage systems. If it does, it could significantly encourage the domestic manufacturing of battery energy storage systems, further supporting India's clean energy transition.

Reduction in Custom Duty for Solar Modules

The custom duty on solar modules under tariff heading 8541 has been reduced from 40% to 20%. However, under the Approved List of Models and Manufacturers (ALMM) policy, the import of solar modules has been heavily restricted, leading to a significant decline in module imports. Given these restrictions, the reduction in custom duty does not provide much practical benefit. Instead, the budget should have focused on reducing the 25% custom duty on solar cells, which would have had a more significant impact on India's solar industry. Lowering the duty on solar cells would make imports more affordable while still maintaining a balance between domestic manufacturing incentives and cost reduction for solar project developers.

Conclusion: A Forward-Thinking Budget for a Sustainable Future

The 2025 Union Budget reflects India's ambitious vision for a cleaner, self-reliant energy future. By supporting clean tech manufacturing, reforming the power sector, advancing nuclear energy, and encouraging domestic battery production, the government is laying the groundwork for a sustainable and economically resilient energy landscape. These measures will not only help India meet its climate commitments but also position the country as a global leader in clean energy innovation.