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India's 2026 Budget Focuses on Energy Infrastructure

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  Published in Business and Finance on Saturday, January 31st 2026 at 18:26 GMT by Business Today
      Locales: N/A, INDIA

New Delhi, January 31st, 2026 - All eyes are on the Indian Parliament as Finance Minister Nirmala Sitharaman prepares to unveil the Union Budget for 2026. While broad economic indicators suggest steady growth, the infrastructure sector, particularly power transmission and the broader energy landscape, is expected to be a central pillar of this year's fiscal plan. Experts predict a budget heavily weighted toward modernizing existing infrastructure, rapidly expanding renewable energy capacity, and laying the groundwork for a truly sustainable energy future.

Addressing the Power Transmission Bottleneck: Beyond Patchwork Repairs

For years, India's power transmission network has lagged behind the nation's economic aspirations. While generation capacity has increased, the ability to efficiently and reliably deliver that power to consumers has remained a significant constraint. The anticipated budget is expected to move beyond piecemeal upgrades and focus on systemic modernization. This includes a substantial allocation toward integrating smart grid technologies - a move lauded by energy analysts as essential for reducing technical losses (currently averaging over 15% nationally) and enhancing grid resilience against fluctuations in supply and demand.

Beyond smart grids, the budget is likely to prioritize High-Voltage Direct Current (HVDC) transmission lines. These lines are crucial for long-distance power transfer, minimizing energy loss compared to traditional Alternating Current (AC) systems. Several large-scale HVDC projects are already in the planning stages, connecting renewable energy-rich regions to major demand centers. Government sources indicate the budget will provide further impetus to expedite these projects and potentially include funding for feasibility studies for new inter-regional links.

Interestingly, a notable development anticipated is a potential framework for facilitating cross-border power trade. Discussions are underway with neighboring countries like Nepal, Bhutan, and Bangladesh to explore opportunities for energy exchange, potentially turning India into a regional energy hub. Incentives for establishing necessary transmission infrastructure for such trades, including grid synchronization protocols and regulatory harmonization, could be a key budget component.

The Green Revolution: Accelerating the Energy Transition

The commitment to achieving 500 GW of non-fossil fuel capacity by 2030 necessitates an aggressive push in the renewable energy sector. The budget is expected to build on existing initiatives, such as the National Green Hydrogen Mission, with increased funding for solar, wind, and biomass projects. However, the crucial missing piece - energy storage - is poised to receive significant attention.

Intermittent renewable sources like solar and wind require robust energy storage solutions to ensure a consistent power supply. The budget is widely expected to announce enhanced subsidies and incentives for battery storage projects, ranging from grid-scale installations to residential and commercial energy storage systems. This could include tax breaks, concessional financing, and performance-based incentives. Furthermore, investment in research and development of alternative storage technologies, such as pumped hydro storage and compressed air energy storage, is also anticipated.

The spotlight will also be on green hydrogen. India views green hydrogen as a game-changer in decarbonizing hard-to-abate sectors like steel, cement, and transportation. The budget is likely to allocate funds for establishing electrolyzer manufacturing facilities, developing hydrogen transportation infrastructure (pipelines and storage), and fostering pilot projects in key industrial clusters.

While the focus is undeniably on renewables, the budget may also include provisions for bolstering nuclear energy. With concerns about energy security and the need for baseload power, a measured increase in investment in nuclear power projects is not entirely off the table, though this is likely to be subject to stringent safety and environmental regulations.

Unlocking Investment: Policy Changes and Incentives

Financial allocations alone won't suffice. The budget is expected to address the regulatory and procedural hurdles that often impede infrastructure development. An expansion of the Production-Linked Incentive (PLI) scheme, encompassing a wider range of components and technologies within the power and energy sectors, is highly probable. The government is also expected to introduce robust risk mitigation mechanisms, such as guarantees and insurance schemes, to attract private sector investment in large-scale infrastructure projects. Simplification of land acquisition processes and environmental clearances will also be critical.

Looking Ahead: Implications and Challenges

The Union Budget 2026 presents a pivotal opportunity to solidify India's position as a global leader in sustainable energy and infrastructure development. Successful implementation, coupled with effective coordination between central and state governments, and active private sector participation, will be key to unlocking the full potential of these investments. However, challenges remain, including the need to address supply chain vulnerabilities, ensure skilled workforce availability, and navigate potential geopolitical risks. The coming fiscal year will be a critical test of India's commitment to a greener, more resilient, and energy-secure future.