Key Highlights for the Union Budget 2026-2027: Energy, Infrastructure and Natural Resources
Introduction
The Union Budget 2026–27 (“Budget”) gives a thrust to India’s infrastructure sector, positioning it as one of the seven strategic and frontier pillars underpinning long-term economic growth. The Budget also underscores a clear focus on long-term energy security, with a ₹20,000 crore allocation for carbon capture, utilisation and storage (CCUS) technologies, alongside targeted basic customs duty exemptions aimed at strengthening clean energy and critical mineral supply chains.
Key Proposals
Set out below is a summary of the key announcements relating to Energy, Infrastructure and Natural Resources made in the Budget:
| KEY PROPOSALS UNDER THE UNION BUDGET 2026-2027 | ||
| INFRASTRUCTURE | ||
| S. No. | Key Proposal | Expected Impact |
| 1. | Increase in infrastructure outlay to ₹12.2 lakh crore from ₹11.2 lakh crore in 2025–26. | Signals continued public capex-led growth, enabling faster rollout of large infrastructure projects and providing demand visibility for EPC contractors, developers and financiers. |
| 2. | Setting-up of the Infrastructure Risk Guarantee Fund. | Strengthen the confidence of private developers regarding risks during the infrastructure development and construction phase. |
| 3. | Proposal for the Scheme for promotion of domestic manufacturing of construction and infrastructure equipment. | Encourages localisation of equipment supply chains, reduces import dependence, and strengthens India’s infrastructure manufacturing ecosystem. |
| 4. | Development of 7 (seven) high-speed rail corridors as inter-city growth connectors. | Enhances regional connectivity between major economic hubs, supporting labour mobility, urban expansion, and industrial clustering |
| 5. | Expansion of Dedicated Freight Corridors. | Improves freight movement efficiency by segregating passenger and cargo traffic, reducing logistics costs, and transit time. |
| 6. | Target to increase the waterways and coastal shipping share to 12% (twelve per cent) by 2047. | Sets a long-term target for increasing the share of inland waterways and coastal shipping, reinforcing modal diversification, and sustainable logistics outcomes. |
| 7. | Introduction of the Coastal Cargo Promotion Scheme | Incentivises the shift of cargo from road and rail to coastal shipping, easing congestion and lowering logistics-related emissions. |
| 8. | Addition of 20 (twenty) new National Waterways over five years. | Strengthens inland water transport infrastructure, enabling cost-effective and environmentally sustainable cargo movement. |
| 9. | Incentives for indigenisation of seaplane manufacturing and Viability Gap Funding for seaplane operations. | Promotes development of a domestic seaplane manufacturing ecosystem, supports innovation in regional aviation, and enables last-mile connectivity to remote and tourism-centric destinations. |
| ENERGY TRANSITION AND SECURITY | ||
| S. No. | Key Proposal | Expected Impact |
| 10. | ₹20,000 crore proposed to be allocated for Carbon Capture Utilization, and Storage Technologies over the course of the next 5 (five) years. | Recognises the role of carbon capture technologies in hard-to-abate sectors, supporting industrial decarbonisation, and net-zero pathways. |
| 11. | Extension of the basic customs duty (“BCD”) exemption on capital goods used for manufacturing lithium-ion batteries to those used for manufacturing Lithium-Ion Cells for battery energy storage systems. | Reduces capital costs for battery energy storage systems manufacturing, improving project economics and domestic capacity creation. |
| 12. | Extension of BCD exemption on sodium antimonate for solar glass manufacturing. | Supports domestic solar module value chains by lowering raw material costs and improving the global competitiveness of Indian manufacturers. |
| 13. | Extension of BCD exemption on import of monazite. | Ensures the availability of critical minerals with applications across the renewable energy and nuclear sectors. |
| 14. | Extension of BCD exemption for nuclear power project goods until 2035. | Supports scaling up of nuclear capacity in line with the Sustainable Harnessing and Advancement of Nuclear Energy for Transforming India (SHANTI) Act, 2025. |
| 15. | Exclusion of the full value of biogas from excise duty computation on biogas-blended CNG. | Improves pricing and commercial attractiveness of biogas blending, accelerating adoption of cleaner transport fuels. |
| 16. | Restructuring of Power Finance Corporation and Rural Electrification Corporation | Aims to improve operational efficiency, balance-sheet strength and lending capacity of key energy sector financiers. |
| NATURAL RESOURCES AND MINES | ||
| S. No. | Key Proposal | Expected Impact |
| 17. | Development of dedicated rare-earth corridors in select mineral-rich states. | Facilitates systematic exploration, extraction and logistics of critical minerals essential for clean energy, electronics, and advanced manufacturing, in the states of Odisha, Andhra Pradesh, Kerala, and Tamil Nadu. |
| 18. | New BCD exemption on capital goods for processing critical minerals. | Encourages domestic processing and value addition in the critical minerals value-chain. |
CMS INDUSLAW View
The Budget gives a thrust to the Indian infrastructure sector by increasing the outlay to ₹12.2 lakh crore, up from ₹11.2 lakh crore in 2025–26. Proposals for 7 (seven) high-speed rail corridors positioned as inter-city “growth connectors”, dedicated rare-earth corridors across mineral-rich states, along with a scheme for promotion of domestic manufacturing of construction and infrastructure equipment, give a fillip to the infrastructure sector.
Long-term energy security and stability feature prominently in the Budget, with ₹20,000 crore allocated over 5 (five) years for carbon capture, utilisation and storage technologies across power, steel, cement, refineries and chemicals. This was a long-awaited announcement and is expected to reduce the carbon footprint of the hard-to-abate sectors. Targeted basic custom duty exemptions for battery energy storage systems; sodium antimonate for manufacturing solar glass; import of monazite; goods required for nuclear power projects (until 2035); and on capital goods required for processing critical minerals in India further boost energy security. In addition, the entire value of biogas is proposed to be excluded while computing the central excise duty on biogas-blended CNG.
To improve efficiency of public sector NBFCs in the energy sector and to achieve scale, there is a proposal to restructure Power Finance Corporation and Rural Electrification Corporation.
From an overall sectoral perspective, the Budget has a targeted approach. Asset monetisation or a renewed push for public–private partnership initiatives, both of which remain central to mobilising private capital in infrastructure do not find mention. The power sector also sees support in certain areas, notably, it is silent on transmission infrastructure, even as grid constraints and curtailment continue to pose significant challenges to renewable energy integration. In addition, with respect to transportation, only metros and railways received limited strategic focus. Collectively, the approach suggests a Budget that prioritises select growth drivers, while leaving certain mature and capital-intensive infrastructure segments, such as airports and highways without fresh fiscal impetus.
While the Budget 2026–27 is targeted in its approach, it presents a forward-looking trajectory for the energy and infrastructure sector, in line with India’s Viksit Bharat vision and ‘future-ready’ development goals.
