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Budget 2025-26: India’s Climate-Resilience Goals
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Context:
India has set ambitious climate targets, aiming for net-zero emissions by 2070 and a 50% reduction in emissions intensity by 2030. The Union Budget 2025-26 plays a crucial role in determining whether India is on track to meet these goals.
Energy Transition: India is making strong strides toward clean energy, but gaps in funding and implementation remain.
- Increased funding for renewables: The Ministry of New and Renewable Energy received INR 26,549.38 crore, up from INR 19,100 crore last year.
- Nuclear expansion: The Nuclear Energy Mission received INR 20,000 crore to develop 100 GW through Small Modular Reactors (SMRs) by 2047. However, concerns persist about nuclear safety and radioactive waste disposal.
- Boost for solar power: The Surya Ghar Yojana saw an 80% hike to INR 20,000 crore, while KUSUM received INR 2,600 crore. A clear implementation roadmap is still missing.
- Green hydrogen investment: Funding doubled to INR 6,000 crore, but high production costs and weak infrastructure remain major obstacles.
- Hydropower stagnation: Funding remained unchanged at INR 51 crore, despite India’s 14,500 MW potential. Investment in grid modernisation and project expansion is needed.
- Wind energy setback: Funding cut by 37.5% to INR 500 crore, despite India being the fourth-largest wind energy producer.
- Biofuel neglected: The Pradhan Mantri JI-Van Yojana saw no new targets, reflecting policy inconsistency.
Infrastructure: Despite increased capital spending, climate resilience is not adequately integrated into infrastructure projects.
- Capital expenditure focus: INR 11.11 lakh crore allocated to infrastructure, but without a climate-resilient approach.
- Maritime sector boost: The INR 25,000 crore Maritime Development Fund promotes green shipping and ship recycling.
- Urban development investment: The INR 1 lakh crore Urban Challenge Fund aims for sustainable urban growth, but lacks climate adaptation strategies.
- EV tax incentives: Tax cuts on EV components promote electric mobility, but charging infrastructure remains underfunded.
- Clean-tech manufacturing mission: New incentives for solar PV cells, EV batteries, and electrolysers, but lacks clear implementation guidelines.
Mobility: India’s transport emissions contribute significantly to climate change, but funding allocations for clean mobility are inconsistent.
- EV funding increase: 20% rise in electric mobility funding, yet uneven allocations risk a fragmented approach.
- PM-eBus Sewa Scheme boost: Increased from INR 500 crore to INR 1,310 crore, but charging infrastructure investment is lacking.
- FAME-II rollback: Funding slashed from INR 4,000 crore to INR 2,058 crore, with no allocation for FY26, hurting private EV adoption.
- Electric Mobility Promotion Scheme discontinued, removing essential EV subsidies.
- Customs duty exemption: Key critical minerals like cobalt, lithium, and lead made cheaper, potentially reducing EV costs.
- Neglect of urban mobility planning: The Smart City Mission received no funding, despite urban transport playing a key role in emission reduction.
ESG and Supply Chains: Stronger Environmental, Social, and Governance (ESG) frameworks are needed for corporate accountability and supply chain sustainability.
- Weak ESG compliance: The Business Responsibility and Sustainability Reporting (BRSR) framework lacks strong KPIs for corporate sustainability tracking.
- Solar imports made cheaper: Customs duty on solar cells cut from 25% to 20%, boosting affordability but increasing import dependency.
Climate Finance: While green finance has expanded, its scale remains insufficient for India’s climate goals.
- Sovereign Green Bonds: INR 20,000 crore allocated, but still inadequate given India’s massive climate finance needs.
- Underdeveloped carbon market: A regulated carbon trading system is needed to attract private investment.
- Climate finance taxonomy missing: The budget lacks a framework to prevent greenwashing.
- Adaptation programmes sidelined: Key schemes like the National Adaptation Fund (NAF) and National Mission on Himalayan Studies (NMHS) were moved to administrative budgets, reducing their effectiveness.
Climate Adaptation: While mitigation efforts received attention, adaptation funding remains weak.
- National Mission for a Green India (NMGI) retained INR 220 crore, but underutilisation of funds remains a concern.
- Biodiversity conservation boost: 30% funding increase, supporting ecosystem protection.
- Jal Jeevan Mission expansion: INR 67,000 crore allocated, aiming for 100% rural tap water coverage by 2028, but lacks focus on groundwater depletion.
- Coastal resilience funding cut: National Coastal Mission budget reduced by 96%, despite rising sea levels and cyclone risks.
- Oceanic climate research halted: The O-SMART programme received no allocation for the second consecutive year.
The Road Ahead: India’s climate budget needs more strategic alignment with its sustainability goals. Key recommendations include:
- Strengthen Adaptation Finance: Reintroduce clear allocations for the National Adaptation Fund to protect vulnerable communities.
- Enhance Climate-Resilient Infrastructure: Ensure capital expenditure projects integrate flood resilience, heat mitigation, and nature-based solutions.
- Expand Nature-Based Solutions: Reverse cuts to National Coastal Mission and scale up afforestation efforts.
- Scale Up Green Finance: Expand sovereign green bonds, introduce a climate finance taxonomy, and strengthen carbon markets.
- Fix Policy and Implementation Gaps: Ensure clear roadmaps and state-level coordination for renewables and EV adoption.
- Accelerate Renewable Energy Growth: Address wind energy funding cuts and focus on grid modernisation for a balanced energy transition.
- Promote Sustainable Mobility Beyond EVs: Invest in public transport, cycling infrastructure, and urban mobility planning alongside EV incentives.
