Highlights Coal-based plants account for 43% of installed capacity and generate 71% of electricity.  Solar and wind generate 13% of electricity with a 37% share in installed capacity.  Their intermittent nature means that increasing their share in generation needs to be carefully sequenced to maintain grid stability. In 2024-25, 58% of targeted transmission lines were added.  The sector remains import-dependent for critical materials used in transmission infrastructure. Distribution utilities continue to incur losses, although losses have come down in recent years.  Losses are due to factors such as underpricing of tariffs and higher technical and commercial losses.

Power is under the concurrent list of the Constitution.[i]  Both the central and state government implement programmes and schemes on the subject.  The Ministry of Power is responsible for policy formulation and implementation for the electricity sector at the central level.[ii]  The Ministry of New and Renewable Energy (MNRE) works towards promotion and development of renewable sources such as solar and wind.[iii] 

These Ministries also administer several public sector undertakings.  As of December 2025, 23% of the generation capacity is owned by the central PSUs such as NTPC and NHPC.[iv]   Another 22% is owned by the state government-owned entities.⁴  In 2024-25, 93% share of the distribution by both revenue earned and volume of energy sold was undertaken by state government-owned entities.[v]  This note analyses budgetary allocation and expenditure trends of the two ministries and discusses key issues.

Overview of Finances

Ministry of Power:  In 2026-27, the Ministry of Power has been allocated Rs 29,997 crore, an increase of 39% over the revised estimate of 2025-26.[vi]  About 1% of this allocation is towards capital expenditure.⁶  60% of the total expenditure has been allocated towards the Revamped Distribution Sector Scheme (RDSS).⁶  This scheme was launched in 2021 to provide support to distribution companies for improving financial and operational performance.[vii]  A key component of RDSS is the assistance for installation of prepaid smart meters.  Other key heads of allocation are: (i) assistance to central public sector undertakings for power projects (25% of the allocation), (ii) transfers to Power System Development Fund (PSDF) (4%), which is utilised for creating transmission systems,

Key announcements in Budget Speech 2026-27 Custom duty exemptions:  The central government will exempt basic customs duty on capital goods used in cells of battery energy storage.  Also, duty exemptions for nuclear power project imports is extended till 2035. Restructuring of PFC and RFC:  Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) will be restructured in accordance with the Viksit Bharat vision for Non-Banking Financial Corporations. Dedicated rare-earth corridors:  The central government will establish rare-earth corridors to promote mining, processing, research, and manufacturing. Carbon Capture Utilisation and Storage:  An outlay of Rs 20,000 crore is proposed for the Carbon Capture Utilisation and Storage (CCUS) technologies over the next five years.

and (iii) viability gap funding for development of battery energy storage system (3%).⁶

Ministry of New and Renewable Energy:  In 2026-27, the Ministry of New and Renewable Energy (MNRE) has been allocated Rs 32,915 crore, an increase of 30% from the revised estimate of 2025-26.[viii]  The increase is driven by higher allocations towards PM Surya Ghar Muft Bijli Yojana (an increase of Rs 5,000 crore).⁸  The scheme was approved in February 2024. [ix]  It provides financial assistance to households for installing rooftop solar.⁹

Table 1: Allocations towards Ministries of Power and New & Renewable Energy (in Rs crore)

Head	2024-25 Actuals	2025-26 RE	2026-27 BE	% change (25-26 RE to 26-27 BE)
Power	19,714	21,588	29,997	39%
of which
RDSS	12,974	15,671	18,000	15%
Assistance to PSUs	2,980	2,732	7,401	171%
Power System Development Fund	1191	1100	1103	0%
MNRE	18,627	25,301	32,915	30%
of which
PM Surya Ghar	7,818	17,000	22,000	29%
Solar Power (Grid)	6,583	1,000	1,775	78%
PM KUSUM	2,560	5,000	5,000	0%
Wind Power (Grid)	800	500	500	0%
Green Hydrogen	301	300	600	100%

Note: BE: Budget Estimates; RE: Revised Estimates.
Sources: Demand No. 71 and 79, Expenditure Budget, Union Budget 2026-27; PRS.

Trends in fund utilisation over the years

Ministry of Power:  The fund utilisation by the Ministry of Power has seen wide fluctuations over the last decade (see Figure 1).  In 2022-23, the actual expenditure by the Ministry was 42% lower than budgeted.  This was mainly driven by lower fund utilisation under RDSS (64%).  In the previous year (2021-22), the actual expenditure was 41% higher than the budget expenditure.  This was due to higher expenditure on multiple schemes such as Integrated Power Development Scheme (IPDS), Deen Dayal Upadhyaya Gram Jyoti Yojana (DDUGY), and programmes including those on strengthening of power systems.  In 2025-26, as per revised estimates, the overall expenditure by the Ministry of Power is 1% lower than budgeted