Union Budget 2025 will play a critical role in addressing challenges such as expanding renewable energy capacity, promoting energy storage and boosting domestic manufacturing. Experts anticipate measures to incentivise renewable projects, support research in energy storage and foster local manufacturing to reduce import dependency. Financial incentives, concessional financing and tax breaks are anticipated to play a significant role in accelerating the sector’s growth and driving the energy transition forward. Industry experts share their expectations from this year’s budget…
What are your expectations from Union Budget 2025? What are the issues that need to be addressed on a priority basis?
Kumar Bibhu, Vice-President, Project Advisory and Structured Finance, SBI Capital Markets
The Indian power sector is poised to play a vital role in the fast-paced economic growth of the country. The key words at this juncture for the sector are “capacity addition”, “energy transition” and “Atmanirbharata”. To achieve these goals, the following is anticipated from Union Budget 2025:
Accelerated capacity additions through debottlenecking
Adding an additional 300 GW of renewable energy capacity over the next six years will require at least 50 GW of new capacity annually. Currently, the sector faces challenges related to land acquisition, power purchase agreement (PPA) availability, connectivity and transmission availability. In this regard, policy initiatives such as the creation of a land bank for the sector may facilitate rapid capacity addition. Encouraging and incentivising state discoms to execute PPAs for power from renewable energy sources can further support this goal. The implementation of commensurate transmission capacity to transport the generated power should also be expedited. These objectives can be achieved through both fiscal and non-fiscal measures, including:
- Continuation of lower corporate tax rate under Section 115BAB of the Income Tax Act, 1961, at least until FY2030.
- Extension of the timeline for implementing the Approved List of Cell Manufacturers beyond the current deadline, until sufficient capacity is available
- Concessional financing for the sector, if possible, through a dedicated institution, to improve access to credit.
Faster transition with emphasis on storage
A meaningful transition in the sector and the replacement of fossil fuel-based energy generation with “greener options” are only possible by ramping up available storage capacity. In this regard, battery energy storage system (BESS) projects may benefit from incentives such as the production-linked incentive (PLI) scheme and viability gap funding (VGF), as well as increased budget for research and development in storage technologies. Clarity on GST implications for storage projects is another element that the sector requires from the upcoming budget. Further, capacity addition in pumped storage projects (PSPs) will benefit from the availability of concessional and dedicated financing lines.
Atmanirbharata
Various PLI schemes introduced for the sector have started yielding results. These need to be further extended to other critical components of the renewable energy value chain. The imposition of anti-dumping duty on critical components, such as glass panels, has led to increased costs. These policies could be harmonised to encourage more domestic manufacturing.
Saurabh Kumar, Vice-President India, Global Energy Alliance for People and Planet
With Union Budget 2025 approaching, we hope to see a decisive increase in funding to accelerate the green energy transition. Priorities must include scaling renewable energy by addressing grid and transmission challenges, advancing BESS for grid stability and reliable power, doubling energy efficiency, and digitalising the energy sector through artificial intelligence (AI), smart meters and data-driven solutions. Streamlining rooftop solar programmes with simplified approvals, financing and monitoring is equally vital. By prioritising these solutions, the budget can drive the creation of a resilient energy infrastructure in India.
Anish Mandal, Partner, Deloitte
India’s ambitious energy transition is gaining momentum, with the nation committed to balancing economic growth and shifting towards cleaner energy sources. A key target is to achieve 500 GW of non-fossil fuel-based power generation capacity by 2030. With our current renewables capacity at 210 GW at the end of 2024, this requires adding roughly 300 GW in the next five years – a mammoth task, given the annual addition rate of around 27-28 GW in recent years.
Reaching this goal will necessitate a multi-pronged approach. The development of large-scale solar and wind projects is crucial, which can be facilitated through the establishment of nodal agencies to create land banks. The upstream solar manufacturing sector has shown progress, particularly in module production, where nameplate capacity has reached 50-60 GW. However, the growth in cell manufacturing capacity has been slower than anticipated, and is only expected to reach 15-20 GW by 2026. While 24 GW of PLI schemes have been rolled out for upstream manufacturing in the solar value chain, the anticipated investment is yet to fully materialise. This could potentially create supply chain mismatches across components since the implementation of the Approved List of Models and Manufacturers II scheme is scheduled for June 2026. Postponing the implementation, along with enabling investments from leading manufacturers in upstream operations, may be required to mitigate this gap and meet the target of 40-50 GW per year of solar addition.
The financial requirement of the energy transition is substantial, requiring trillions of dollars in capital investments. Mobilising finance is a critical area, with many jurisdictions exploring tax incentives to support the growth of the domestic green bond market. In the area of battery storage, there is a need for clarity on GST implications on BESS-as-a-service. While financial support, such as VGF, has been offered to the offshore wind sector, further support may be required to drive the growth in this nascent sector.
Nuclear energy is being recognised as a key component of the future energy mix, providing crucial baseload power. Small modular reactors (SMRs) are garnering increasing attention and investment from both traditional heavy industries and emerging AI/data centre applications. The recent issuance of a request for proposal for Bharat modular reactors is a welcome step in this direction. However, addressing the lengthy timelines associated with setting up nuclear power plants and resolving supply chain uncertainties is critical. Further, the current regulatory framework is perceived as a potential barrier to broader participation. There is a need to involve more designated government agencies with the necessary expertise and capabilities for carrying out preparatory work and conducting feasibility studies for setting up nuclear power plants.
Similarly, a budgetary allocation in the form of a revolving fund could be created to support preparatory activities for developing large hydro and PSP projects. This would be helpful to accelerate the project development cycle, bring down costs and promote private participation.
The expansion of electric vehicle (EV) charging infrastructure is also vital. The current outlay towards charging infrastructure under the PM Electric Drive Revolution in Innovative Vehicle Enhancement scheme is still insufficient to meet the anticipated demand. Low utilisation rates have impacted the viability of charging stations, highlighting the need for operational subsidies to promote utilisation. Categorising charging infrastructure under the infrastructure industry would enable access to affordable financing for setting up charging stations. Further, aligning the GST on battery packs with the lower rate for EVs could accelerate the adoption of EVs.
The PLI scheme for advanced chemistry cell (ACC) is already in place, with 10 GWh of ACC reserved for stationary storage. While the government is expected to release a request for proposal for grid-scale energy storage systems, additional support is needed for battery component manufacturing to develop an indigenised supply chain. In the field of green hydrogen, a significant gap remains between grey and green hydrogen, despite the incentives under the National Green Hydrogen Mission. A formal demand obligation, initially focused on sectors like refineries, may be considered to drive demand. Finally, in the transmission and distribution segment, reform should focus on enhancing grid capacity, particularly to meet peak loads, which are increasing rapidly. Recent privatisation initiatives in Uttar Pradesh and union territories could be further complemented in the budget with smaller-scale initiatives.
Gautam Mohanka, Chief Executive Officer, Gautam Solar
The year 2024 marked a transformative period in India’s green energy journey, with renewable energy capacity surpassing 200 GW in October 2024, constituting 46.3 per cent of the total installed capacity. This was primarily driven by solar energy’s 90.76 GW contribution. This milestone reflects the success of initiatives such as the Jawaharlal Nehru National Solar Mission and supportive government policies. Looking ahead, Union Budget 2025 is expected to accelerate this momentum by focusing on key areas such as scaling rooftop solar installations through PM Surya Ghar Yojana, improving digital infrastructure (for instance, the National Portal for Rooftop Solar) for better project execution, and supporting BESS with customs duty concessions to enhance grid stability.
The renewable energy sector also expects the government to take substantial initiatives to address the talent gap through rural skill development programmes under the Pradhan Mantri Kaushal Vikas Yojana and Pradhan Mantri Kisan Urja Suraksha evam Utthaan Mahabhiyan schemes. All in all, Union Budget 2025 is expected to solidify India’s global leadership in renewable energy, align the country’s economy with net zero goals, and drive sustainable economic development.
Naveen Munjal, Director – Business Development and Commercial, Apraava Energy
Union Budget 2025 presents an opportunity for India to expand the scope and accelerate the ongoing energy transition on several important fronts. While the domestic production of solar power-related equipment must be rapidly scaled up to meet the growing demands amidst import restrictions, offering incentives, for instance, for export-oriented manufacturing units, will boost exports of wind and, in the future, solar solutions. Taxes are a crucial aspect of any budget; a reduction in corporate taxes will increase the availability of funds for private investment in the renewable energy sector.
Initiatives such as the PLI scheme, tax breaks and concessions for manufacturers of transmission equipment like geographic information systems, transformers, and static synchronous compensators will boost local manufacturing capabilities and reduce India’s dependency on imports.
From an operational standpoint, there is a pressing need to expedite the signing of PPAs. Uncertainty on this front often dampens investments, discourages renewable energy developers, impacts project execution and exposes developers to equipment price fluctuations. Fiscal interventions that encourage state-owned discoms to expedite PPA signing will speed up and streamline project commissioning, creating a favourable climate for the participation of both domestic and international players.
Vikram V., Vice-President and Co-Group Head – Corporate Ratings, ICRA Limited
The growth in electricity demand and the rising share of renewables in all-India generation highlights the need for the development of energy storage capacities. Measures to fast-track the development of battery storage and pumped hydro storage projects remain crucial. In addition, policy measures are required to incentivise the manufacturing of grid-scale batteries and backward integration in module manufacturing. This apart, adequate budgetary allocation for augmenting transmission infrastructure to evacuate power from upcoming renewable power projects is expected. Further, an increase in the budgetary allocation for smart metering remains important to scale up these installations and progress towards improving the operating efficiencies of state discoms.
Jitendra Mamtora, Chairman, Transformers and Rectifiers India Limited
“We expect the production linked Incentive (PLI) to be extended further to transformers industry, low-cost funding for capacity expansion to meet increased demand and 15 per cent export incentives to compete Chinese OEM in the overseas market. Government initiatives and support will sharpen the trajectory of the Transformer market in India. We hope for the extension of much higher value PLI to the entire manufacturing sector particularly energy and energy original equipment manufacturers for another 10 years. Under the Make in India Policy of the Government, incentives should be given to the transformer Industry. The transformer market demand will witness stupendous growth due to surge in power demand. Also, duty should be eased on raw materials which are not produced in India such as Electrical Steels. Local to vocal policy needs to be strengthened furthermore to support the Transformer Industry. As India moves towards its renewable energy goals, the demand for transformers is expected to increase further, reshaping market dynamics.”