Budget 2025: Transmission, Distribution Incentives, Solar Duty Cuts Much Needed Boost For Power Sector

The Indian government’s proposal to incentivise electricity distribution reforms and augmentation of intra-state transmission capacity by states will advance the financial health and capacity of power distribution companies, said industry experts.

In her budget 2025 speech, Finance Minister Nirmala Sitharaman said States will be allowed to borrow an additional 0.5% of their Gross Domestic Product over and above what they get under Financial Responsibility and Budget Management Act.

However, the additional borrowing would be contingent on meeting the reforms initiated under the revamped distribution system scheme.

The move will enable the power distribution companies to provide efficient and reliable services to consumers.

In a significant push towards energy transition, the government has also launched the Nuclear Energy Mission for Viksit Bharat.

The mission aims to develop at least 100 GW of nuclear energy by 2047, a crucial step towards reducing India's carbon footprint. To achieve this goal, the government plans to amend the Atomic Energy Act and the Civil Liability for Nuclear Damage Act, facilitating active partnerships with the private sector.

A key component of the Nuclear Energy Mission is the research and development of Small Modular Reactors. With an outlay of Rs 20,000 crore, the mission aims to operationalise at least five indigenously developed SMRs by 2033.

In another significant move the government has announced reduction in basic customs duty on solar panels by half. The Budget has proposed to reduce the BCD on panels to 20% from 40% earlier.

The government has also proposed reducing the BCD on solar cells to 20% from 25% earlier.

The move is likely to reduce the price of solar panels further, which are already at their all time lows.

“It is going to be a positive development for India’s domestic manufacturers, who are dependent on imports of solar cells from China,” said Rupesh Sankhe, vice president at Elara Capital and power sector analyst.

He also noted that halving the BCD on solar panels is not going to affect domestic manufacturers, as they are prevented by Approved List of Models and Manufacturers, that prohibits foreign manufacturers to sell in Indian market if they are not approved under ALMM.

As of today Ministry of New and Renewable Energy has not approved any foreign manufacturer under ALMM.