Budget 2026 Powers Up Nuclear Sector: Impact on L&T, BHEL, and Power Grid

A Clear Signal for Clean Baseload Power

Union Budget 2026 has sent a powerful, long-term signal to India's energy sector, placing nuclear power firmly at the center of its clean energy and energy security strategy. Finance Minister Nirmala Sitharaman announced a crucial fiscal incentive: the extension of Basic Customs Duty (BCD) exemptions on goods required for nuclear power projects until 2035. This single measure provides a decade of policy certainty and significantly improves the financial viability of upcoming nuclear projects, creating a clear growth path for the entire ecosystem.

This move is not happening in isolation. It builds upon recent legislative reforms, particularly the SHANTI (Sustainable Hydrogen and Nuclear Technology Initiative) Act, which opened the historically state-monopolized sector to private investment. While the SHANTI Act provided the legal framework, the Budget 2026 announcement delivers the financial catalyst needed to attract private capital and accelerate capacity expansion.

The Core Announcement: A Decade of Duty Relief

The decision to extend and expand BCD exemptions on imported capital goods and components for nuclear plants directly addresses one of the sector's biggest hurdles: high upfront costs. By lowering the cost of critical equipment, the government reduces the overall project capital expenditure for the Nuclear Power Corporation of India (NPCIL) and any future private operators. This makes project financing more manageable and improves the internal rate of return, a key metric for attracting investment into a sector known for its long gestation periods.

This fiscal support is critical for India's ambitious goal of expanding its nuclear capacity from the current 8.8 GW. A lower cost structure enables faster project rollouts and supports the government's vision of positioning nuclear as a reliable, carbon-free baseload power source to complement the intermittency of solar and wind energy.

Impact on EPC and Component Suppliers

The budget's nuclear push creates a multi-year order pipeline for India's leading capital goods and engineering firms.

Larsen & Toubro (L&T): As India's premier Engineering, Procurement, and Construction (EPC) company with proven expertise in the nuclear sector, L&T is a primary beneficiary. The company has been integral to building critical components for NPCIL's reactors. A sustained, decade-long push for new projects translates directly into a larger addressable market for L&T's heavy engineering and construction divisions.

Bharat Heavy Electricals Ltd (BHEL): State-owned BHEL is a key supplier of the nuclear island, including the turbine-generator set. Increased project sanctions will drive significant order inflows for BHEL, supporting its manufacturing capabilities and providing long-term revenue visibility.

Other Key Suppliers: Specialized component manufacturers like MTAR Technologies, which supply high-precision parts for reactors, will also see sustained demand. The budget effectively underwrites a long-term expansion program, creating a robust domestic supply chain.

Policy Measure	Details	Expected Impact	Key Beneficiaries
BCD Exemption Extension	Basic Customs Duty exemption on imported goods for nuclear projects extended until 2035.	Lower project capex, improved financial viability, faster project rollout.	NPCIL, L&T, BHEL, MTAR Technologies
Green Finance Eligibility	Anticipated inclusion in green taxonomy.	Access to lower-cost ESG funds and green bonds, reducing cost of capital.	Project developers (NPCIL, private players)
Private Participation	Enabled by the SHANTI Act, supported by fiscal incentives from the budget.	Increased investment, faster capacity addition, new joint ventures.	Entire nuclear ecosystem

Strengthening the Grid: A Boon for Transmission Companies

New nuclear power plants are large, centralized sources of generation that require significant grid infrastructure to evacuate power to demand centers. This creates a direct and positive impact on transmission companies.

Power Grid Corporation of India Ltd (PGCIL): As the country's central transmission utility, PGCIL will be responsible for building the high-capacity transmission corridors linked to new nuclear sites. The budget's overall emphasis on infrastructure capex, combined with the specific nuclear push, ensures a strong project pipeline for PGCIL. Furthermore, the stable, 24/7 power from nuclear plants enhances overall grid stability, making it easier to integrate fluctuating renewable energy sources.

Broader Energy Security and Market Outlook

The government's focus on nuclear power is a strategic move towards achieving energy independence and meeting its net-zero commitments. Unlike solar and wind, nuclear power is not dependent on weather conditions and provides a consistent power supply, which is essential for industrial and economic growth. By promoting a domestic nuclear industry, India also reduces its long-term reliance on imported fossil fuels like coal and gas.

For investors, the budget has illuminated a clear, long-term investment theme. While challenges such as project execution timelines, regulatory approvals, and public perception remain, the financial de-risking provided by the customs duty exemption is a significant step forward. The market will now look for concrete project announcements and the final details on green finance classification to gauge the pace of the sector's expansion.

Conclusion: From Policy to Execution

Union Budget 2026 has moved beyond mere intent and provided a tangible, long-term fiscal incentive for the nuclear power sector. The extension of customs duty relief until 2035 creates a stable policy environment that encourages investment and capacity building. This decision will energize the entire value chain, from EPC giants like L&T and component suppliers like BHEL to the grid operator PGCIL. The focus now shifts from policy-making to the effective and timely execution of new nuclear power projects.