Summary

The Union Budget 2026-27 allocates Rs 20,000 crore to advance Carbon Capture, Utilisation and Storage (CCUS) technologies in heavy industries.

The move aligns with India’s Net Zero 2070 strategy.

This investment aims to bridge the gap between pilot projects and large-scale systems.

It targets sectors like steel and cement, which are crucial for industrial decarbonisation and economic competitiveness.

In a significant policy signal on industrial decarbonisation, Union Finance Minister Nirmala Sitharaman proposed an outlay of Rs 20,000 crore over the next five years to scale up carbon capture, utilisation and storage (CCUS) technologies, positioning them as a key pillar of India’s long-term climate and industrial strategy.

The announcement, made in Parliament during the Union Budget 2026–27 speech on February 1, 2026, aligns with the national CCUS roadmap released in December 2025 and targets large-scale deployment across power, steel, cement, refineries and chemicals, sectors widely considered among the hardest to decarbonise.

Sitharaman said the investment is intended to help CCUS technologies reach higher levels of technological and commercial readiness in end-use applications. These sectors account for a substantial share of India’s industrial emissions, and in many cases lack cost-effective alternatives to deep emission cuts. The funding is, therefore, aimed at bridging the gap between pilot projects and commercially viable, large-scale systems.

Part of Net Zero 2070 strategy

The CCUS push is embedded in India’s broader commitment to achieve Net Zero emissions by 2070. The Research, Development and Innovation Roadmap for CCUS, released by the Department of Science and Technology in December 2025, outlines a long-term ambition to capture 750 million tonnes of carbon dioxide (CO2) from hard-to-abate sectors such as steel and cement by 2050. This roadmap focuses on advancing indigenous technologies, promoting demonstration projects, enabling international collaboration and attracting private investment.

DST defines CCUS as a set of technologies designed to prevent carbon dioxide from entering the atmosphere by capturing emissions from industrial processes or power generation, and then either storing the CO2 permanently in geological formations or utilising it in products such as chemicals, fuels or building materials. In operational terms, this may involve separating CO2 before combustion (pre-combustion capture), after combustion (post-combustion capture), or from industrial process streams, followed by compression, transport — often via pipelines — and storage in deep underground formations such as depleted oil and gas fields or saline aquifers.

Global context & debate

Internationally, CCUS is increasingly seen as an important, though not uncontroversial, tool in climate mitigation portfolios. According to the Global Carbon Capture and Storage Institute, there are about 50 operational CCUS facilities worldwide, collectively capturing around 50 million tonnes of CO2 per year. Around 44 projects are under construction and more than 500 are in various planning stages, reflecting growing interest, particularly in North America and Europe.

However, the technology’s role remains debated. A 2025 report by the World Resources Institute highlighted two persistent concerns: The slow pace of deployment relative to climate targets and the risk that CCUS could entrench continued fossil fuel use by providing a technical fix that delays structural shifts toward cleaner energy systems. Critics also point to high costs, energy penalties and unresolved questions around long-term storage liability.

Industry perspective: From policy to projects

Indian industry and climate experts have largely welcomed the Budget allocation as a pragmatic move. Abinash Mohanty, Global Sector Head for Climate Change and Sustainability at IPE Global, said the commitment signals recognition that CCUS is indispensable for emission reductions in sectors where electrification or fuel switching is not yet viable.

Atanu Mukherjee, President and CEO of Dastur Energy, stressed that the next challenge lies in execution. He noted that the funding must be channelled toward shared CO2 transport and storage infrastructure, early-mover risk support and commercial-scale demonstration projects. Clear regulatory frameworks covering measurement and verification of captured CO2, third-party access to transport networks and long-term storage liability will also be critical to attract private capital.

Balancing climate & competitiveness

For policymakers, CCUS offers a way to reconcile climate commitments with industrial growth. Steel, cement, refining and chemicals are central to India’s infrastructure and manufacturing expansion, as well as to employment and exports. Deep emission cuts in these sectors without transitional technologies could affect competitiveness and investment flows. By supporting CCUS, the government is signalling an approach that seeks to decarbonise without deindustrialising.

The Rs 20,000 crore allocation, therefore, is more than a research grant. It represents an attempt to anchor CCUS as a scalable industrial system integrated with India’s power, fuels and emerging hydrogen strategies. If successfully implemented, it could help India build domestic expertise in a technology expected to play a role in global decarbonisation, while addressing emissions from sectors where solutions remain limited.

The Union Budget 2026–27 marks a clear shift in treating resource security and decarbonisation as strategic economic priorities, said Masood Mallick, chairman of Confederation of Indian Industry national committee on waste to worth technologies and managing-director and group CEO of Re Sustainability. “It directly addresses the competitiveness challenge Indian industry faces under mechanisms such as the EU’s Carbon Border Adjustment Mechanism and provides a credible pathway for hard-to-abate sectors to remain globally competitive while decarbonising,” he said.