Budget 2026: India's Renewable Sector Seeks Grid and Storage Push

Introduction: A Shift in Priorities

As India prepares for the Union Budget 2026, set to be presented on February 1, the renewable energy sector's expectations have matured significantly. Having achieved the milestone of meeting nearly half of its power consumption from non-fossil fuel sources, the industry's focus is shifting from sheer capacity addition to building a resilient ecosystem. Stakeholders are now calling for targeted policies that strengthen grid stability, scale up energy storage, and create a fully integrated domestic manufacturing supply chain to support the nation's ambitious goal of 500 GW of renewable capacity by 2030.

Bolstering Domestic Solar Manufacturing

A primary demand from the industry is the extension of incentives across the entire solar manufacturing value chain. While India has made strides in module and cell production, with nearly 182 GW of module and 86 GW of cell capacity under construction as of June 2025, a critical gap remains in upstream components. Industry leaders are advocating for the Production-Linked Incentive (PLI) scheme to be expanded to cover capital-intensive segments like polysilicon, ingots, and wafers. Prashant Mathur, CEO of Saatvik Green Energy, emphasized the need for a PLI program for these upstream components, coupled with accelerated depreciation benefits for manufacturing equipment. Similarly, D.V. Manjunatha of Emmvee Photovoltaic Power pressed for the reintroduction of 80% depreciation for new facilities to unlock further investment. This sentiment is echoed by calls to rationalize customs duties on critical raw materials that are not yet available domestically, ensuring that local manufacturing remains cost-competitive.

The Urgent Need for Energy Storage Solutions

Energy storage has emerged as a top priority to manage the intermittency of renewables and ensure grid stability. The industry is united in its call for significant policy support for Battery Energy Storage Systems (BESS). A key demand is the rationalization of the Goods and Services Tax (GST). While electricity is exempt from GST, BESS services attract an 18% tax, which directly increases the cost of renewable power. Kishor Nair, CEO at Avaada Energy, and other experts have called for eliminating or reducing this GST to 5% to accelerate deployment.

Furthermore, the industry seeks an expanded and more flexible Viability Gap Funding (VGF) framework to make large-scale storage projects financially viable. Stakeholders like Akshay Hiranandani of Serentica Renewables highlighted the need for VGF for grid-connected battery assets to support frequency regulation and meet peak demand. Calls are also growing for an extension of the PLI program to cover the entire storage ecosystem, including advanced-chemistry cells and components like anodes and cathodes.

Strengthening Grid and Transmission Infrastructure

The rapid addition of renewable generation capacity is putting immense pressure on India's transmission and evacuation infrastructure. Industry leaders have warned that without commensurate investments in the grid, the pace of renewable deployment could slow down. Neerav Nanavaty, CEO of BluPine Energy, stated that focused investments in transmission infrastructure are crucial to maintain momentum. The wishlist includes funding for green energy corridors, smart grids, and advanced grid-stabilizing technologies such as Static Synchronous Compensators (STATCOMs) and grid-forming inverters. Simarpreet Singh of Hartek Group underscored the need to accelerate funding for high-voltage direct current corridors and extra-high-voltage substations to prevent bottlenecks and curtailment.

| Key Industry Demands for Budget 2026 | | :--- | :--- | | Solar Manufacturing | Extend PLI scheme to polysilicon, ingots, and wafers. Reintroduce accelerated depreciation benefits. Rationalize customs duties on key inputs. | | Energy Storage (BESS) | Reduce GST on BESS from 18% to 5% or nil. Expand Viability Gap Funding (VGF). Extend PLI scheme for battery components. | | Grid Infrastructure | Increase investment in transmission and evacuation. Fund smart grids and advanced stabilization technologies. | | Finance & Taxation | Provide low-cost, long-term green financing. Introduce tax-efficient capital recycling (e.g., zero tax on SPV dividends). Resolve GST input credit refund issues. | | R&D and Skilling | Reinstate 200% income-tax deduction for in-house R&D. Allocate funds for battery testing labs and skill development programs. |

Reforming Finance and Taxation Structures

Across the board, developers and manufacturers have flagged the need for financial and tax reforms to lower the cost of capital and improve project bankability. A major request is the introduction of tax-efficient structures for capital recycling. Vineet Mittal, Chairman of Avaada Group, advocated for zero income tax on dividends distributed by renewable energy Special Purpose Vehicles (SPVs) to their holding companies, which would help lower financing costs and tariffs. There is also a strong demand for affordable, long-term green financing to translate announced projects into on-the-ground reality. Stakeholders are also seeking resolution for structural tax anomalies, particularly around the refund of GST input credit and the implementation of customs duties, which currently affect cash flows and competitiveness.

Promoting Research, Development, and Skilling

To ensure long-term competitiveness and technological self-reliance, the industry is calling for greater budgetary support for Research and Development (R&D) and workforce training. Tanmoy Duari of AXITEC Energy India noted that support for advanced technologies like TOPCon and HJT is essential for Indian manufacturers to compete globally. A specific recommendation includes reinstating the 200% income-tax deduction for in-house R&D expenditure. Additionally, dedicated funds for battery testing labs, certification facilities, and skill development programs are seen as critical to building a robust domestic ecosystem.

Conclusion: Building a Resilient Energy Future

The collective wishlist from India's renewable energy sector for Union Budget 2026 paints a clear picture of an industry moving into its next phase of growth. The focus has decisively shifted from merely chasing capacity targets to building the foundational pillars of a sustainable and self-reliant energy ecosystem. By addressing the needs for robust grid infrastructure, scalable energy storage, a complete domestic manufacturing value chain, and supportive financial policies, the upcoming budget has the opportunity to ensure that India's clean energy transition is not only rapid but also resilient and economically competitive.