Budget 2025- Green Stocks Fail To Fire Despite Manufacturing Push

The 2025 budget presented by Finance Minister Nirmala Sitharaman had one announcement at the end that overshadowed almost everything mentioned before. Yes, we are referring to the hike in Income Tax exemption limit for salaried individuals to Rs 12 lacs, a move that is seen as the biggest effort yet to spur domestic consumption by the government.

However, much before this, among the few sectors to get special mention and attention from the government, the clean energy sector, including renewable energy, EVs and nuclear energy got some major attention, indicating the government's commitment to stay the path on India's clean energy transition. The allocations and focus on nuclear energy are a clear sign that bridging the gap between baseload requirements and renewable energy generation will need more than just energy storage in the next two decades.

But first, the key headline announcements. The reduction in Basic customs duty on solar cells and modules, especially the steep 50% cut in the latter from 40% to 20% is a clear sign of the government heeding feedback from the ground. Solar cells saw a reduction from 25% to 20%.  Clearly, the government would like to narrow the gap that has opened up between domestic and imported modules. However, the net impact will be limited as DCR conditions remain, as does the ALMM. The move has been considered a net negative for the domestic manufacturing sector, who will face a little margin pressure now as comparisons will be made with imported costs.

Increasing allocation for Solar sector: By increasing the allocation from Rs 15,000 crore approx. to almost Rs 25,000 crore, the government has provisioned for continuing support to the key flagship schemes PM Suryaghar for rooftop solar, and PMKUSUM. The hike would indicate an indirect impact of at least 10 GW of new capacity that would benefit from the fresh allocation.

Interestingly, the provisioning for wind power and other renewable projects has been reduced from Rs 850 crores to Rs 550 crores, indicating a further acknowledgement of the role in the near future for ramping up renewable capacity. Of course, readers will be aware that there is no space for Wind Power in major segments like residential or agriculture.

The move has been taken as predictable, with little to no impact on developers and related green stocks.

EVs and Storage . With a clear objective to achieve in EVs and storage what has been done in solar modules, cells, and wind energy equipment, the government has gone further on last years exemption when it comes to critical minerals and materials required by the industry to make in India. Besides zero duty imports, the exemption has been carried forward to capital goods or plant and machinery required to do so, further strengthening the case to make in India. Even a policy for more effective mining of critical minerals for mine tailings was also promised. The move is likely to support the growth of multiple firms into recycling, besides more startups that can refine more efficiently.

Nuclear Energy. India's nuclear energy additions are clearly considered key to provide baseload support to the grid in the future. With its ability to deliver electricity over much longer periods of time without a break, the government clearly hopes to see nuclear grab a higher share than the less than 5% share it has on total generation currently. Towards that, a Nuclear Energy Mission with a 100GW target has been set (for 2040 we presume), with a promise of making amendments to the Atomic Energy Act and the Civil Liability for Nuclear Damage Act to support the enetry of more private sector players in the sector. With an allocation of Rs 20,000 crores, small modular reactors (SMRs) continue to remain a great hope for the future, with the first ones expected to be deployed as early as 2033.

Industry watchers who had hoped to see more from the government in terms of possible PLI schemes for various components in the clean tech industry etc need not be dissapointed, as a lot of policy changes have regularly been announced outside the budget. For instance, if the domestic solar cells shortage persists as clearly seen, expect some action soon, unless the government is confident that the shortage is on its way out. the duty reductions will certainly provide some protection from a reversal in price trends in China. With little movement yet on Green hydrogen linked projects that are exempt from DCR or ALMM requirements, we don't expect to see a significant surge in imports yet.  The efforts to clean up discom balance sheets continue with incremental measures, including the extra 0.5% of SGDP borrowing  limit for reforms linked borrowing.