Article 1: Intent and outcome
Why in news: Union Budget 2026–27 expanded climate-linked allocations, notably ₹20,000 crore for CCUS and higher funding for rooftop solar, highlighting India’s cautious shift towards industrial decarbonisation amid EU CBAM pressures.
Key Details
- Climate focus since 2021, but allocations remain cautious and disjointed
- Budget 2026–27 targets industry decarbonisation, decentralised solar, green hydrogen and nuclear
- ₹20,000 crore CCUS indicates a pilot, not scale-up, phase
- PM Surya Ghar and PM-KUSUM expanded, yet execution hurdles remain
- EU CBAM makes steel and aluminium decarbonisation vital for exports
Background: Climate Focus in Union Budgets
- Union Budgets began integrating climate priorities from 2021, amid COVID-19 disruptions
- Initial allocation of ₹4,500 crore aimed at localising solar PV manufacturing and reducing import dependence on China
- Overall approach has remained cautious and fragmented, with limited scaling of allocations
Budget 2026–27: Sectoral Focus
- Attention given to five broad areas:
- Hard-to-abate industries (cement, steel, aluminium, fertilisers)
- Decentralised solar power
- Solar irrigation pumps
- Green hydrogen
- Nuclear energy
Carbon Capture, Utilisation and Storage (CCUS)
- Flagship announcement: ₹20,000 crore outlay over five years
- Allocation is modest given the high cost and complexity of CCUS technologies
- Signals a pilot and demonstration phase, not full-scale industrial deployment
- Global experience (e.g., Norway, Canada, U.S.) shows uneven and expensive scaling
- CCUS mainly relevant where process emissions are unavoidable
Trade and Competitiveness Angle
- EU’s Carbon Border Adjustment Mechanism (CBAM) will impose carbon costs on imports
- Makes industrial decarbonisation an export competitiveness issue, not just a climate goal
- Steel and aluminium are most exposed, forming the bulk of India’s CBAM-linked exports
Decentralised Renewable Energy Schemes
- PM Surya Ghar Muft Bijli Yojana scaled up to ₹22,000 crore (from ₹17,000 crore RE)
- Supports rooftop solar, reducing land pressure, transmission losses, and household costs
- Key challenges: discom cooperation and upfront financing
- PM-KUSUM allocation sustained at ₹5,000 crore
- Revised estimates show better-than-expected absorption
Nuclear Energy
- Zero basic customs duty on nuclear plant equipment extended till 2035
- Lowers input costs but nuclear power remains capital intensive
- Faces long gestation periods, financing risks, and liability concerns
- Recent legal changes allow private participation, but investor appetite remains uncertain
Green Hydrogen
- Continues to receive policy support, but actual spending remains limited
- Highlights the persistent gap between ambition and execution
Way Forward
- Scale up climate allocations in line with India’s net-zero targets and sectoral needs
- Move from pilot projects to deployment, especially in CCUS and green hydrogen
- Strengthen industrial decarbonisation to address CBAM-linked export risks
- Enable private capital mobilisation through risk-sharing, viability gap funding and clear regulation
- Improve execution capacity of schemes like PM Surya Ghar and PM-KUSUM via discom reforms and easy finance
- Adopt an integrated energy strategy, balancing renewables, storage and nuclear
- Ensure policy certainty and long-term signals to crowd in domestic and global investors
Conclusion
India’s climate budgeting reflects ambitious intent but cautious execution. While priorities like industrial decarbonisation, decentralised renewables and clean technologies are clear, limited allocations and weak private capital mobilisation constrain impact. Bridging the gap between policy vision and on-ground delivery is essential for safeguarding competitiveness, energy security and climate commitments.