The article was first published in The Times of India Online on January 31 2026. Please click here to read the article.
The Union Budget is more than an exercise of balancing books. It is a powerful instrument for fiscal adjustment, a platform for policy announcements, and, most importantly, a signal of the priorities the Indian state wishes to advance. Nowhere is this signaling role more consequential than in the energy sector, an industry that is expanding rapidly, absorbing vast amounts of capital, and yet remains exposed to strategic vulnerabilities.
In recent years, the union budget provisions on energy have focused on attracting investment and smoothing operational frictions. This year, however, the context is fundamentally different. The year 2025 emerged as a watershed moment in global politics and economics. Geopolitical fragmentation, supply-chain concentration, and renewed great power competition are reshaping economic choices worldwide. Despite these headwinds, the Indian economy has remained resilient. Sustaining that growth and resilience will require a dramatic expansion of reliable, affordable energy.
This makes the Union Budget a critical lever not just for economic growth, but for national security. Security today is no longer confined to borders or balance sheets. Energy security has become central to economic sovereignty, and on this front India remains deeply exposed. Nearly 90 percent of crude oil is imported, more than half of natural gas comes from abroad, and most clean energy components - solar cells, modules, batteries, and critical materials - are sourced overseas. Even in emerging technologies that will define the next decade, import dependence is the norm rather than the exception.
This vulnerability coincides with a growing environmental challenge. Rising fossil fuel consumption is contributing to global emissions, while local pollution has reached crisis levels in Indian cities. Energy policy sits at the heart of both problems. Cleaner coal technologies, expansion of nuclear power, accelerated renewables, and large-scale energy storage along with rapid electric mobility expansion all offer pathways forward. The Union Budget provides a unique opportunity to signal which of these pathways India intends to prioritise-and how seriously.
Such signaling is not new. Previous Budgets have attempted to shape outcomes through incentives and subsidies, but results have been mixed. The experience with production-linked incentives (PLIs) for energy storage is instructive. Announced three years ago with an outlay of ₹20,000 crore for 50 GWh of battery manufacturing capacity, the scheme struggled to take off. The core constraint was not capital, but technology. Access to competitive, scalable battery technology was limited, and since then global manufacturing and intellectual property have become even more concentrated, particularly in China.
The lesson is clear. If India is to achieve a clean energy transition while strengthening security, it must move decisively up the value chain-from assembly and manufacturing into product development and core technology. The Union Budget can meaningfully advance this shift in three ways. First, by clearly signaling national priorities within energy, not just by sector but by specific segments of the value chain. Second, by recognising that these challenges cannot be solved by firms acting in isolation and must instead be addressed through structured collaboration between industry and the state. Third, by designing fiscal measures that make such collaboration an integral part of corporate strategy.
Collaboration is not a fuzzy ideal; it is a strategic necessity. The scale of capital required, and the nature of research involved are far beyond incremental innovation. Past R&D incentives have yielded limited results because they were fragmented, generic, and underpowered - a “spray and pray” approach ill-suited to capital-intensive sectors such as advanced solar technologies, energy storage, nuclear power, and advanced chemicals. Multiple firms independently attempting to recreate foundational technologies is inefficient and ultimately self-defeating.
This logic extends beyond clean energy. In oil and gas, indigenous development of core technologies requires upstream cooperation, even if competition continues downstream. The same applies to advanced chemicals, where import dependence remains high. Encouragingly, institutional platforms such as the Anusandhan National Research Foundation (ANRF) have been established by the Government to support joint investment and collaboration. What the Union Budget must now do is align fiscal incentives to make participation in such platforms both attractive and unavoidable.
Speed, scale, and precision will be decisive. This is where modern artificial intelligence and high-performance computing can play transformative roles - particularly in materials science, process optimisation, and fundamental research - compressing timelines and enabling experimentation at a scale previously unattainable. Given the magnitude of India’s ambitions, AI must be treated not as a peripheral tool but as a core enabler of energy innovation.
India’s experience with the Unified Payments Interface offers a useful parallel. UPI succeeded because it created a common technology stack on which private innovation could flourish. Energy needs similar shared core and digital technology platforms - across storage, grids, renewables, and advanced fuels - on top of which firms can differentiate through products and services. Fiscal signaling through the Union Budget can catalyse the creation of such platforms.
Beyond these strategic issues, industry will naturally look for specific measures, such as inclusion of natural gas under the GST regime and steps to reduce the cost of capital. There are also issues that foreign capital faces under Section 94B on permanent disallowance of interest costs due to time limitations (8 years, which can be inadequate for energy and infrastructure investments). These are important. But the larger question before the Budget is on how far the government is prepared to use fiscal policy not merely to finance energy consumption, but to build energy capability. That, more than any single tax change or subsidy, will determine the country’s energy future.
