Opinion – Why India’s Energy Policy Is Now An Industrial Strategy

Union Budget 2026–27 marks an inflection point for India’s Energy and Environment sector. Beyond incremental capacity additions, the focus is now firmly on building resilient energy systems, domestic manufacturing value chains, and long-term investment certainty—key ingredients for global competitiveness.

The Shift from Capacity to Systems
The Budget’s emphasis on battery manufacturing, grid-scale storage, critical minerals processing, and solar glass signals a move toward integrated energy systems rather than standalone renewable assets. Extending customs duty exemptions for batteries, storage equipment, and critical mineral processing lowers upfront capital costs and improves project viability across the clean-energy value chain.

Storage and Manufacturing Take Centre Stage
Explicit funding for battery energy storage systems, alongside continued support for the National ACC PLI programme, positions storage as the backbone of grid stability. At the same time, duty relief on key solar inputs such as sodium antimonate strengthens upstream manufacturing – reducing import dependence and supporting export competitiveness.

Data Centres: The Hidden Demand Driver
One of the Budget’s most consequential moves is providing tax certainty for cloud services and data centres until 2047. This sends a strong signal to global hyperscalers and is likely to accelerate large-scale investments – driving sustained demand for reliable, low-carbon power, storage, cooling, and grid upgrades.

Long-Term Certainty and Energy Security
Extending customs duty exemptions for nuclear power projects until 2035 provides much-needed cost visibility for baseload, non-fossil energy. Combined with incentives for biogas, grid reforms, and SEZ flexibility, the Budget reinforces energy security while supporting transition fuels and circular economy models.

What This Means for Industry and Investors
Budget 2026–27 de-risks clean-energy investments by aligning fiscal incentives with long-term policy certainty. As FTAs reduce trade barriers and domestic manufacturing scales up, India is positioning itself as a supplier of higher-value clean-energy components and integrated solutions.

Where Growth and Capital Are Likely to Flow
As these policy measures take effect, several growth pockets are emerging across the Energy and Environment landscape. Battery manufacturing, grid-scale storage, and energy system integration are positioned to see accelerated investment as storage becomes central to grid reliability. Upstream solar manufacturing, particularly solar glass and processed materials, stands to benefit from lower input costs and export competitiveness.

At the same time, data centres are set to become a powerful demand anchor, driving opportunities across clean power procurement, storage-backed renewable solutions, cooling infrastructure, and grid upgrades. Bio-CNG and waste-to-energy projects are also likely to scale, supported by improved project economics and policy backing. Collectively, these areas reflect India’s shift toward higher-value, system-level energy solutions rather than standalone assets.

Looking Ahead (2026–2028)
The next two years will be defined by how quickly storage deployment, grid upgrades, and manufacturing capacity scale together. Those who align early with integrated energy solutions—across storage, manufacturing, and power reliability—stand to benefit the most.

By – Sekhar Ramani, Principal Consultant, Energy & Environment Growth Advisory, Frost & Sullivan