The financial commitment of the government to industrial decarbonisation is clear (Illustration: C R Sasikumar)
On February 1, Finance Minister Nirmala Sitharaman presented the Union Budget 2026-27. It has come at a time when India is facing some of the greatest climate pressures. The pressures are mounting, whether from the $12 billion in damages after a series of catastrophic floods and cyclones in 2025, or from a series of abnormal monsoons that devastate agriculture. The budgetary allocations for energy efficiency, renewable energy, and emissions reduction reflect the government’s interest in linking growth to sustainability. But it remains mitigation-oriented, and nowhere near the $2.5 trillion needed by 2030 to shield India against climate change through financial allocations. This year’s budget presents a mixed bag for the challenges that the current climate-vulnerable India faces.
An energy-secure and green manufacturing future will require cutting-edge technologies. At the centre of the budget’s effort in this direction is a colossal investment in climate capture, to the tune of Rs 20,000 crore in the next five years. It also focuses on utilisation and storage (CCUS) technologies to emphasise the hard-to-abate sectors like steel, cement, power. The focus of the government has been in raw materials, to reinforce the renewable components supply chain. The New Rare Earth Corridors in Odisha, Kerala, Andhra Pradesh, and Tamil Nadu will assist in the extraction and processing of the minerals necessary for turbines and batteries.
The Basic Custom Duty (BCD) on Monazite, an important mineral ore, has been reduced from 2.5 per cent to nil. All of the fiscal measures heavily privilege domestic productive capabilities. The budget announces an exemption for BCD on sodium antimonate to promote solar glass manufacturing and extends the exemption on capital goods to machinery used for Battery Energy Storage Systems (BESS) in particular. Meanwhile, to improve even more energy security, the import duty exemption to Nuclear Power Projects has been extended until 2035, and finally, biogas has been exempted from excise duty on blended CNG so as to promote clean energy sources. The Budget places a decisive emphasis on “resilience” within the agricultural sector, moving beyond basic support to integrate advanced forecasting technology and high-value diversification. Aligned with the government’s third kartavya — ensuring resources reach every sector — these measures aim to insulate farmers from climate and market volatility.
In an effort to provide accurate forecasts and advisories, the finance minister also announced the launch of Bharat-VISTAAR or the Virtually Integrated System to Access Agricultural Resources as a pilot project. The objective is to empower and change the way farms make decisions by connecting the data from AgriStack portals using ICAR agriculture principles and this multilingual AI tool. Nearly three-quarters of clients have not accessed credit before, and like other credit programs, this one offers interest-free loans, as well as personalised risk-optimised advice tools for managing the weather and planning crops.
The budget advocates for a transition to high-value crops and enhancing income security for farmers. It has a programme for coastal regions which abounds with cashew, cocoa and sandalwood, while the hilly region is meant for nut plantations like almond and walnut. Recognising the importance and potential of the industry, the government has laid out a target that aims at converting brands such as “Indian Cashew” and “Indian Cocoa” into leading global brands by 2030, with the use of initiatives for claiming “raw material self-sufficiency”. Competitiveness will also be increased by encouraging the replacement of old non- productive trees through a Coconut Promotion Scheme.
While the budget presents a strong trajectory for the transformation of India’s energy system, it favours investments in technologies that will lower future emissions. Closer inspection reveals a glaring disparity — while billions are funnelled into mitigating the problem, resources specifically earmarked for adaptation are spread out in small amounts. They are also at a much smaller scale.
The financial commitment of the government to industrial decarbonisation is clear. Also, the budget allocates Rs 20,000 crore over five years explicitly to Carbon Capture Utilisation and Storage (CCUS) technologies for heavy industry, such as steel and cement. This is further supported by long customs duty exemptions for nuclear power up to 2035, customs duty exemption to inputs of solar glass and manufacturing.
Nuclear investments represent large capital expenditures for India that promise energy security and low-carbon usage for the future. There is, however, not much by way of direct spending for climate adaptation – for instance, building infrastructural systems that can withstand events like a super cyclone. Though the 16th Finance Commission has allocated grants for disaster management, there is no centrally funded flagship “Climate Adaptation” mission on the scale of other initiatives.
The writer is with Bharati Institute of Public Policy, Indian School of Business (ISB). He is now the Lead Author of the IPCC’s upcoming report on Cities and Climate Change
