​Intent and outcome: On India’s climate budget for 2026-27

Union Budgets began reflecting greater climate concerns from 2021, in the thick of the COVID-19 pandemic, with a modest ₹4,500 crore to localise solar photovoltaic production and to reduce India’s dependence on Chinese imports. But there has been a cautious, disjointed approach to the scale and allocations. While five broad sectors (cement, steel, aluminium and fertilizers; decentralised solar power; greening irrigation pump sets; green hydrogen; and nuclear energy) received attention in Budget 2026-27, the most prominent announcement was the proposed five-year outlay of ₹20,000 crore for Carbon Capture, Utilisation and Storage (CCUS). This is a modest provision for a suite of costly and complex technologies. The allocation signals that India is entering a pilot and demonstration phase, rather than embarking on immediate industrial deployment. While operational examples exist in Norway, Canada and the U.S., scaling CCUS has proven expensive and uneven. The technology is primarily relevant to sectors where emissions are embedded in the production process. The EU’s Carbon Border Adjustment Mechanism (CBAM) will impose carbon costs on imports of high-emission products, so for India, decarbonising industrial production is no longer only a climate imperative. It is now a question of export competitiveness, particularly for steel and aluminium, which form the bulk of India’s CBAM-exposed exports to the EU.

The Budget also substantially scales up the PM Surya Ghar Muft Bijli Yojana rooftop solar scheme — ₹22,000 crore in 2026-27 from ₹17,000 crore (RE) for the current year. It is a welcome push towards decentralised energy systems that reduce land pressure, transmission losses and household energy costs. However, implementation challenges remain, including discom cooperation and upfront finance. Similarly, allocations for PM-KUSUM (solar irrigation pumps), have been sustained at ₹5,000 crore. Revised estimates suggest stronger-than-anticipated absorption. For nuclear energy, the government has extended zero basic customs duty on imports of nuclear plant equipment until 2035. While this reduces input costs, nuclear power remains capital intensive, with long construction timelines and financing risks. Recent legal changes permit private participation, but whether private capital will enter a sector entwined with national security, safety and liability concerns remains uncertain. Green hydrogen, despite budgetary support, continues to see modest actual spending, highlighting the persistent gap between policy ambition and execution. Overall, India’s climate budget for 2026-27 repeats a pattern: big on intent, cautious on allocations, and uncertain in its ability to mobilise the private capital required to accelerate decarbonisation across vital sectors.