Budget 2026: ₹20,000 cr incentives for carbon capture, utilization, storage

The Centre will roll out a scheme to incentivize the carbon capture, utilization, and storage (CCUS) technologies with an outlay of ₹20,000 crore for a period of five years, Union finance minister Nirmala Sitharaman announced in her Budget 2026 speech.

Presenting the Union Budget 2026-27, Sitharaman said the government would incentivize these technologies to scale up and achieve higher readiness levels in end-use applications across sectors. CCUS would be used across five key sectors: power, steel, cement, refineries, and chemicals.

“Aligning with the roadmap launched in December 2025, CCUS technologies at scale will achieve higher readiness levels in end-use applications across five industrial sectors, including power, steel, cement, refineries, and chemicals. An outlay of ₹20,000 crore is proposed over the next five years,” she said.

On 2 December, the department of science and technology launched the 'R&D Roadmap to Enable India’s Net Zero Targets through Carbon Capture, Utilization and Storage'.

The roadmap prepared by a high-level task force aims to capture the research and development (R&D) needs for CCUS in India. It includes translational R&D to scale up proven concepts from laboratory to pilot, demo, and finally industrial scale, and fundamental R&D that is disruptive in nature and could considerably improve the viability of CCUS technologies. A few selected, unique ideas can then be accelerated further to reach a higher maturity level through more concerted efforts, according to the roadmap report.

For India's economic growth and our climate-change obligations, the R&D approach proposed in the roadmap gives industries an edge in quickly implementing CCUS and makes our journey to net-zero by 2070 achievable, according to the report.

The allocation for CCUS is a clear, pragmatic policy signal from the government towards achieving industrial decarbonization, said Atanu Mukherjee, president and chief executive of Dastur Energy.

“For sectors such as steel, cement, refining and chemicals, CCUS is an essential enabler of emissions reduction while protecting competitiveness, investment, and jobs," he said.

"The priority now should be to translate this intent into buildable projects by focusing on shared CO₂ transport and storage infrastructure, early-mover risk support, commercial-scale projects, and clear rules for measurement, transport access, and long-term liability. Integrated thoughtfully with India’s power, fuels and hydrogen strategies, this funding can anchor CCUS as a scalable industrial system—supporting growth and decarbonization together.”

Suddhasatta Kundu, director for power sector advisory at Nangia and Co. Llp, said the incentives would also help support blue hydrogen production for industries such as steel and cement.

Carbon emissions

India’s power and industrial sectors contributed around 1,600 million tonnes per annum of CO2 emissions (about 60%) of the total emissions of 2,600mtpa in 2020. The remaining 40% of emissions come from distributed point emissions sources such as agriculture, transport, and buildings, which are not amenable to CCUS, according to data from government think tank NITI Aayog.

“Fuelled by economic growth across sectors as well as rapid urbanization, emissions from these sectors are expected to increase to nearly 2,300mtpa by the year 2030, thus making their capture and abatement critical,” said 2022 NITI Aayog report.

Customs duty exemption

Continuing the focus on energy transition, the finance minister has also announced a basic customs duty exemption on imports of goods required for nuclear power products and components used in the manufacturing of lithium-ion cells for battery energy storage systems (BESS). So far, exemptions have been granted for components used in the manufacturing of cells used to produce batteries for electric vehicles.

With the latest announcement, the relaxation will also be allowed for the components used in large-scale batteries used in BESS. With the integration of more and more renewable power to the grid, BESS is expected to play a key role as it would bring in the much-needed stability to the system, ensuring a continued supply of power even during peak demand and low supply hours.

“I propose to extend the existing basic customs duty exemption on imports of goods required for nuclear power projects till the year 2035 and expand it for all nuclear plants irrespective of their capacity,” she said.

The move complements the government's policy measures to boost manufacturing and the installation of nuclear power generation capacity in the country, including the announcement of the National Nuclear Energy Mission in the previous budget and the recently passed Sustainable Harnessing and Advancement of Nuclear Energy for Transforming India (SHANTI) Bill, 2025.

The current installed nuclear power capacity in the country is 8.78 gigawatts. With the indigenous 700 megawatts and 1,000mw reactors being developed through international cooperation, the capacity is projected to rise to 22.38GW by 2031-32. The long-term target is to achieve 100GW of nuclear power capacity by 2047.

“I propose to extend the basic customs duty exemption given to capital goods used for manufacturing lithium-ion cells for batteries, to those used for manufacturing lithium-ion cells for BESS too. I propose to exempt basic customs duty on import of sodium antimonate for use in the manufacturing of solar glass,” Sitharaman said.

Chetan Shah, chairman and managing director, Solex Energy Ltd, said that by extending customs duty exemptions for components for batteries, BESS, and nuclear infrastructure, the government has provided long-term policy certainty that will accelerate domestic value addition and global-scale manufacturing in India.

Devansh Jain, executive director, INOXGFL Group, also noted that the policy support for BESS, including customs duty exemptions for lithium-ion cell manufacturing, along with duty relief for key solar manufacturing inputs, will play a critical role in strengthening grid stability and accelerating large-scale renewable integration. “These measures are particularly relevant for developers and manufacturers working to build end-to-end domestic clean-energy value chains,” Jain added.