Union Budget 2026-27: Solar, Storage Get Big Boost

Solar takes centre stage in the clean energy strategy

Finance Minister Nirmala Sitharaman used the Union Budget 2026-27 to restate India’s commitment to a clean energy transition, with solar power positioned as a central pillar. The Budget narrative aligns the clean energy push with the Viksit Bharat vision, linking renewables to longer-term economic and infrastructure growth. The emphasis is not limited to generation capacity. It extends to enabling areas such as grid readiness, domestic manufacturing, and energy storage, where policy support is intended to improve the reliability of renewable supply.

The Budget framework is built around two themes that matter for the power sector. The first is higher public capital spending to support infrastructure build-out. The second is targeted incentives and fiscal measures aimed at reducing input costs for domestic manufacturing and accelerating adoption of storage solutions that can support round-the-clock clean power.

Capex raised to ₹1,221,000 crore

A key headline measure in the Budget is the rise in overall capital expenditure to ₹1,221,000 crore. In the context of energy transition, higher capex signals continued public spending intent across infrastructure, including power transmission and related enabling networks. While capex is not renewable-specific, it affects the investment backdrop for sectors that depend on long-gestation infrastructure and stable policy signals.

The Budget also notes higher allocations across several renewable-linked schemes, with the stated objective of accelerating deployment and strengthening domestic manufacturing. This matters for solar because near-term growth in capacity additions is increasingly tied to grid availability and domestic supply chain readiness.

Battery storage gets a sharp VGF increase

Among the Budget’s renewable-linked announcements, the most direct boost to storage economics is the increase in Viability Gap Funding (VGF) for Battery Energy Storage Systems (BESS) to ₹1,000 crore. The article notes this is a nine-fold jump. VGF is designed to bridge the gap between project costs and commercially viable tariffs, and its scale often determines the pace at which new capacity can be bid out.

In practical terms, a larger VGF pool can help accelerate tendering activity and improve project bankability, especially for standalone BESS and hybrid projects that aim to deliver more consistent power across non-solar hours. The Budget positions BESS as a core enabler for 24/7 clean power, indicating that storage is no longer treated as a supporting technology but as part of the system design.

₹599.99 crore for Green Energy Corridors

The Budget allocates ₹599.99 crore for Green Energy Corridors. These corridors are described as critical for renewable power evacuation and grid integration. With solar generation concentrated in certain regions, transmission build-out becomes necessary to move power efficiently and reduce congestion.

The article highlights that these corridors will ease grid bottlenecks and support smoother integration of solar power into India’s power system. For investors and developers, grid connectivity and evacuation timelines often determine project commissioning risk, so corridor funding is a key operational enabler rather than a headline subsidy.

Rooftop solar push via PM Surya Ghar scheme

One of the flagship programmes referenced is the PM Surya Ghar Muft Bijli Yojana, which received a funding boost of nearly 29%. The Budget’s intent, as described, is to promote rooftop solar adoption across households and expand the reach of distributed generation.

The stated expected impact is two-fold: reducing household electricity bills and lowering dependence on conventional power sources. Rooftop solar also changes load patterns for distribution companies and can reduce peak demand pressures in specific pockets, depending on adoption and net-metering implementation.

Customs duty relief for storage and solar manufacturing

Budget 2026 introduced targeted fiscal measures to improve cost competitiveness and encourage indigenous manufacturing across the renewable value chain. A key step is the basic customs duty (BCD) exemption on capital goods used for manufacturing lithium-ion cells for BESS. The article states this is expected to boost the storage ecosystem by reducing project costs and encouraging large-scale domestic production.

A second exemption is for sodium antimonate, described as a crucial raw material for solar glass manufacturing. By lowering input costs for domestic solar component manufacturing, the measure is positioned as supportive of greater self-reliance in the solar supply chain, particularly for module manufacturing that depends on glass availability and pricing.

CCUS allocation of ₹20,000 crore over five years

Alongside solar and storage, the Budget commits ₹20,000 crore over the next five years for Carbon Capture, Utilisation and Storage (CCUS). While CCUS is distinct from solar, it is presented as part of the broader clean energy and decarbonisation toolkit.

The multi-year commitment indicates that the clean transition agenda is being designed across multiple technologies, with solar and storage highlighted as near-term system priorities, and CCUS positioned as a longer-horizon intervention.

Ministers underline storage and manufacturing intent

The article cites Union Minister Pralhad Joshi saying the Budget aims to accelerate grid-scale energy storage and enable seamless integration of renewable energy. It also references his remarks on extending the BCD exemption for capital goods used in lithium-ion cell manufacturing for batteries and BESS.

Joshi also points to the BCD exemption on sodium antimonate for solar glass as supportive of domestic solar manufacturing. These statements reinforce that the policy intent is split between demand-side acceleration for storage and supply-side strengthening for manufacturing inputs.

Parallel policy moves: a separate ₹5,400 crore VGF for 30 GWh

Separate from the Budget-specific ₹1,000 crore BESS VGF mention, the article also details a government-approved VGF scheme worth ₹5,400 crore to support development of 30 GWh of new BESS capacity. The scheme is stated to aim at enabling round-the-clock renewable capacities and attracting ₹33,000 crore in investment. Funding will come from the Power System Development Fund (PSDF).

Allocation details included are 25 GWh distributed among 15 states and 5 GWh allocated to NTPC Ltd. The first round of tenders is planned within three months, as per the text. The scheme is described as additional to an earlier ₹3,700 crore VGF scheme under which 13.2 GWh of BESS projects are already under implementation, taking the combined pipeline to 43.2 GWh by 2027-28.

ISTS waiver and project conditions

The article notes a 100% waiver on Inter-State Transmission System (ISTS) charges for BESS projects co-located with renewable energy plants and commissioned by June 30, 2028. A similar ISTS waiver is also approved for pumped hydro storage projects commissioned by the same date. These waivers can materially affect delivered power costs by reducing transmission-linked charges for eligible projects.

It also lists execution conditions for the new VGF tranche: projects must be commissioned within 18 months from signing the Battery Energy Storage Purchase Agreement (BESPA) or Power Purchase Agreement (PPA). The BESS capacity is stated to preferably have a two-hour discharge duration with an average of 1.5 cycles per day.

MNRE’s floating solar with storage proposal

The Ministry of New and Renewable Energy (MNRE) is preparing to launch a new scheme for floating solar power projects equipped with battery storage. As per statements attributed to MNRE Secretary Santosh Kumar Sarangi at an India Edge Event organised by CII, MNRE has approached the Finance Ministry seeking VGF worth ₹7,000 to ₹8,000 crore.

The floating solar projects are described as planned for water reservoirs of around 300 GW capacity. If approved, the scheme would expand the solar deployment canvas beyond land-based projects, while pairing generation with storage to improve supply quality.

Key numbers at a glance

Why these measures matter for investors and the sector

Taken together, the measures focus on three constraints that regularly shape renewable execution in India: grid evacuation, cost of domestic manufacturing inputs, and the need for storage to firm up renewable supply. Funding for corridors and ISTS waivers addresses transmission economics and integration risks. Duty exemptions and manufacturing-linked incentives target input cost pressures and supply chain resilience.

The scale-up of VGF support, both through the Budget’s ₹1,000 crore BESS allocation and the separate ₹5,400 crore programme for 30 GWh, indicates an effort to move storage from pilot scale to a structured procurement pipeline. The next immediate milestones mentioned include tender issuance within three months for the 30 GWh tranche, and execution timelines linked to BESPA or PPA signing.

Conclusion

Union Budget 2026-27 reinforces a solar-led clean energy strategy while placing storage, grid upgrades, and domestic manufacturing support alongside generation growth. The policy pipeline also includes separate BESS VGF procurement and ISTS waivers through June 30, 2028, with tenders expected within three months for the 30 GWh tranche.