India’s Climate Budget 2026–27: Mere Announcements or Real Action?

KAKALI DAS

It has been a few days since India’s Finance Minister NirmalaSitharaman presented the Union Budget for the upcoming financial year. This gap gives us some breathing space to move beyond headlines and try to understand what this budget really means for India’s climate goals and energy transition.

This year’s budget carries several climate linked announcements, some ambitious, some cautious, and some that clearly reflect the difficult trade offs India continues to face as it balances growth, development, and environmental responsibility.

India’s Climate Budget 2026–27: Mere Announcements or Real Action?

One of the most talked about announcements is the decision to launch a national mission on Carbon Capture Utilisation and Storage, or CCUS, with a proposed outlay of Rs 20,000 crores spread over five years. At first glance this looks like a major commitment. However, a closer look at the numbers tells a more restrained story.

For the upcoming financial year, the Ministry of Power has been allocated only five hundred crore rupees for this purpose. This modest allocation signals that India is still in the early stages of experimentation, focusing on research, pilot projects, and demonstration plants rather than large scale industrial deployment.

To understand why CCUS keeps appearing in climate discussions, it is important to first understand what it actually means. Carbon capture utilisation and storage refers to a group of technologies designed to capture carbon dioxide emissions at their source before they are released into the atmosphere. This is especially relevant for industries such as cement, iron and steel, aluminium, fertilisers, and even shipbuilding.

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In these sectors, emissions are not only caused by burning fossil fuels but are also produced as part of the chemical processes involved in manufacturing. This makes them extremely difficult, and sometimes nearly impossible, to decarbonise using renewable energy alone.

CCUS attempts to address this problem by capturing carbon dioxide, compressing it, and then either using it for other purposes or storing it deep underground in geological formations. The idea is to prevent this carbon from adding to global warming.

There are a few working examples in the world today. In Norway, the Sleipner project captures carbon dioxide from natural gas processing and stores it beneath the North Sea. In Canada, the Boundary Dam project captures carbon emissions from a coal fired power plant. In the United States, carbon capture is used in fertiliser and ethanol plants, especially in the Midwest.

However, there is a significant challenge. CCUS technologies are expensive, energy intensive, and difficult to scale. Despite decades of research, they have largely remained limited to pilot projects and niche applications. This is why the announcement of a twenty thousand crore mission should be read as long term research support rather than a solution that will rapidly cut emissions across India’s industrial sector.

There is also an urgent economic reason why India is paying attention to CCUS now. The European Union has already implemented the Carbon Border Adjustment Mechanism, which aims to impose additional costs on imports of carbon intensive products such as steel, cement, aluminium, and fertilisers.

For India, decarbonising these sectors is not just about meeting climate commitments. It is also about protecting export competitiveness and ensuring the survival of key industries in a changing global trade environment.

Alongside CCUS, one of the most visible and people facing climate initiatives in this budget is the PM Surya Ghar Muft Bijli Yojana, which focuses on decentralised rooftop solar power. Announced in February 2024, this scheme aims to encourage households to install rooftop solar systems by offering subsidies. Under the scheme, households can generate their own electricity, reduce their power bills, and in some cases even earn income by feeding excess electricity back into the grid.

The budget numbers show that the government is serious about this programme. In the first year after the announcement, spending reached nearly eight thousand crore rupees. Revised estimates suggest that this figure has almost doubled in the current financial year.

For 2026-27, the allocation has been raised to twenty two thousand crore rupees. This represents a strong fiscal push and clearly indicates that decentralised solar power is being positioned as a central pillar of India’s energy transition.

This focus matters because rooftop solar offers several advantages over large scale solar parks. It reduces the need for large land acquisitions, cuts transmission losses, and directly empowers households. Unlike grid scale solar projects, rooftop solar does not require vast areas of land, which are often agricultural or ecologically sensitive. In a country where land conflicts are common, this is a significant benefit.

That said, implementation has been uneven. The success of rooftop solar depends heavily on the cooperation of distribution companies, clear and fair net metering rules, and access to affordable upfront finance for households. In many states, these factors remain weak. So while the money has been allocated, the real challenge lies in delivery and execution on the ground.

India has also continued to invest in large scale solar power projects that feed electricity directly into the grid. Budget data shows that allocations for these projects have fluctuated over the years, with cuts in some periods and restorations in others. For the upcoming year, allocations have increased again, reflecting the government’s continued reliance on grid scale renewables to boost installed capacity.

However, grid scale solar comes with its own set of trade offs. Large solar parks require thousands of acres of land, often located in semi arid or marginal farming regions. This has already reshaped rural economies in several parts of the country.

A well known example is the Pavagada solar park in Karnataka, where farmers shifted from cultivation to becoming land lease recipients. While this provided stable income for some, it also disrupted local food systems and altered traditional livelihoods and social structures. These changes raise deeper questions about the long term impact of renewable energy expansion on rural life and agrarian economies.

Another important scheme that continues to receive attention is the PM Kusum Scheme, launched in 2019. This scheme aims to replace diesel powered irrigation pumps with solar pumps, reduce fuel costs for farmers, cut emissions, and ease pressure on electricity distribution companies.

Budget figures for PM Kusum reveal an interesting trend. Actual spending in the 2024 to 25 financial year crossed two thousand five hundred crore rupees and remained at similar levels initially in the current year. However, revised estimates show a sharp increase to around five thousand crore rupees, a level that has been maintained in the next year’s budget.

This jump from budgeted to revised estimates suggests that the scheme has gained momentum on the ground, not just on paper. Reports from the Comptroller and Auditor General and data from the Ministry of Power indicate that installations have picked up, though progress remains uneven across states. Grid connected solar pumps have seen greater success compared to standalone systems.

Despite these challenges, PM Kusum is one of the few schemes where actual spending paints a more optimistic picture than headline announcements, especially in terms of rural decarbonisation.

The budget also renewed its focus on nuclear energy. By exempting basic customs duty on imports of nuclear power plant equipment, the government has reduced capital costs and sent a clear signal that nuclear energy remains a key part of India’s low carbon base load strategy. In a system increasingly dominated by variable renewable energy, nuclear power is seen as a stable source of electricity that can operate round the clock without emitting carbon dioxide.

Green hydrogen, another much discussed climate solution, continues to receive attention but with modest progress. The National Green Hydrogen Mission remains in place, but actual spending and project execution have been slower than initially expected. One major challenge is water. Producing green hydrogen requires large quantities of clean water, which is a serious concern in a water stressed country like India. While experiments using sea water and desalination are underway, these approaches add to costs, energy demand, and technical complexity.

When all these elements are taken together, India’s climate budgeting presents a mixed picture. There is clear intent, reflected in ambitious missions and rising allocations in some areas. At the same time, there is caution in scaling up unproven technologies and a reliance on pilot projects and phased implementation. Private sector participation remains limited in some areas, partly due to policy uncertainty and financial risk.

A new variable entering this already complex equation is the government’s push to attract data centres. Through tax incentives and policy support, India aims to become a global hub for digital infrastructure. However, data centres are extremely energy intensive, requiring uninterrupted power supply and large amounts of water for cooling.

At a time when heatwaves are becoming more frequent and water scarcity is worsening, meeting this surge in demand sustainably poses a serious challenge. How this additional load will be integrated into India’s climate and energy strategy remains an open question.

Ultimately, the climate story emerging from the 2026 to 27 budget is a familiar one. It is a story of ambition tempered by caution, of long term visions paired with short term constraints, and of unresolved structural challenges that continue to shape India’s development path.

The budget lays down important signals, but the real test will lie in execution, coordination across ministries and states, and the ability to align climate action with social and economic realities. That is where India’s climate transition will truly be decided.

Mahabahu Climate Forum

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