Budget 2026: Extensive duty exemptions on equipment to boost renewable energy ecosystem

MUMBAI: Finance Minister Nirmala Sitharaman on Sunday announced a slew of exemptions on basic customs duty for equipment and raw material imported to develop a domestic clean power ecosystem.

Among the equipment exempted from BCD are capital goods required to make lithium ion cells for battery energy storage systems (BESS) and for nuclear power plants, and machinery to process critical minerals. The exemptions are aimed at cutting costs in these sectors.

“These measures will significantly lower capital costs for domestic battery production, making ‘Make in India’ energy storage solutions globally competitive,” said Anurag Choudhary, CMD and CEO of Himadri Speciality Chemical Ltd, which makes raw material for cell manufacturing.

Sodium antimonate, a white power used for manufacturing solar glass, has also been exempted from BCD. This raw material, which is used to enhance the transparency of glass used in solar panels, attracts a 7.5% import duty. The exemption can cut the cost of glass used to make solar panels.

The entire value of biogas used to make blended compressed natural gas (CNG) has been exempted for the purpose of calculating central excise duty. This will result in biogas blended CNG attracting lower taxes, promoting its adoption.

Competitive tariffs

The exemptions of BCD on capital goods for cell manufacturing and nuclear power plants “can aid in the tariff competitiveness of BESS as well as nuclear power projects in India,” said Ankit Jain, vice president & co group head - corporate ratings at ICRA.

The increased allocation for PM Surya Ghar Muft Bijli Yojana and the continued focus on PM Kisan Urja Suraksha evam Utthaan Mahabhiyan will support renewable capacity addition in the country, he said.

The reduced cost of acquiring capital goods would bring down the cost of setting up a local manufacturing ecosystem for cells for BESS, experts said. The savings could trickle down to the end products, making Indian cells more competitive with imports, they added.

Similar benefits are expected to accrue to solar module manufacturing from reduced duties on sodium antimonate.

“By reducing input costs while encouraging domestic manufacturing, the budget enables India’s clean-energy transition to be indigenously powered, globally competitive, and aligned with long-term energy security,” said Shashank Sharma, founder-chairman and CEO of Sunsure Energy, an independent power production company. "This will help strengthen India’s industrial base while staying integrated with global trade, technology, and value chains, and ensuring that self-reliance is anchored in productivity rather than protectionism."

BESS functions as massive reservoirs for the power grid. By utilizing extensive arrays of battery cells, these systems capture surplus electricity from fluctuating renewable sources—like wind and solar—and discharge it back into the grid when production dips.

This balancing act is crucial for maintaining a stable and reliable energy flow as India increasingly adds variable renewable energy sources to the grid. India's total installed capacity of non-fossil power reached 262.7 gigawatts in November, as per government data, accounting for more than half of the total installed electricity capacity in the country at 509.6 gigawatts.

As India increases its reliance on renewable energy, the country is expected to need 34.7 GWh of BESS capacity by the end of FY27, according to the Central Electricity Authority—far above the current operational capacity of just over 0.5 GWh. India is projected to require 411.4 GWh of energy storage capacity by FY32, including 236.2 GWh from BESS, the CEA estimates.