Union Budget FY2026–27 puts nuclear energy, carbon storage and critical minerals at the centre of India’s decarbonisation strategy

The much-awaited Union Budget FY2026-27, presented by the Finance Minister Nirmala Sitharaman on Sunday, February 1, signals a decisive shift towards aligning India’s economic growth with its decarbonisation ambitions and the long-term vision of Viksit Bharat 2047. This Budget comes at a juncture when India prepares to leverage opportunities arising from the EU–India trade deal while simultaneously navigating the cost risk posed by the European Union’s Carbon Border Adjustment Mechanism (CBAM). Also, for carbon-intensive industries like aluminium, which emits 20.88 tonnes of CO2 per tonne of production in India, making the industry as one of the most carbon-intensive sectors in the country compared to the global average, this budget underpins the urgency of accelerating the transition to decarbonisation.

Metal industries like aluminium at the crossroads of climate policy

India’s metal industry, particularly aluminium, remains heavily reliant on coal-based electricity, which accounts for nearly 80 per cent of its energy mix. This structural dependence places exporters at risk under CBAM, potentially eroding competitiveness in the European market despite improved trade access.

Recognising this challenge, the Budget places strong emphasis on non-fossil fuel power sources and energy storage - an essential foundation for decarbonising energy-intensive industries such as aluminium, steel, and cement.

What's in budget - nuclear power as the centrepiece

The India government has dropped a budget of INR 200,000 million (USD 2.18 million) on carbon capture technology and extended duty-free imports for nuclear power plants until 2035. Needless to say, both these moves will support the decarbonisation journey of the aluminium industry. Recently, at LME Mumbai Forum 2026, Satish Pai, Managing Director of Hindalco Industries, stressed upon the integration of nuclear power in renewable energy mix for metal industries and of course aluminium, given the non-intermittent nature of this power and also because it is carbon-free. In line with this, the India government has proposed the extension of the basic custom duty exemption on imports of goods required for nuclear power projects, expecting this move to support manufacturing requirements critical to expanding nuclear energy infrasture.

For an in-depth analysis inti the aluminium industry's market projection, refer to our report: Global Aluminium Industry Outlook 2026

As of April 2025, India has 25 nuclear reactors in operation in 7 nuclear plants, with a total installed capacity of 8,800 MW. In FY2024-25, nuclear power produced was 56.7 TWh, contributing 3 per cent of total power generation in the country. By FY2031-32, India aims to reach nuclear power capacity of 22,480 MW, which will require the commissioning of ten additional reactors.  This overall mission aligns with India’s commitment to achieving 100 GW of nuclear capacity by 2047.