India has set for itself some ambitious targets when it comes to renewable energy and its dependence on fossil fuels. Under the National Green Hydrogen Mission, India hopes to develop a production capacity of at least 5 MMT (Million Metric Tonne) per annum, by 2030. This shall further lead to an addition of 125 GW of renewable energy capacity in India. This blog aims to analyse the various flagship policies, economic measures, and regulatory measures, that have been started in support of this milestone. Further, the blog analyses how the transition to green hydrogen could bring out a significant transformation in the Indian landscape.


India, accounting for approximately 4.5% of global greenhouse gas emissions, ratified the Paris Agreement, also known as the "Paris Climate Accords," on October 2, 2016. This commitment requires India to generate at least 40% of its electricity from non-fossil fuel sources by 2030. The international consensus recognizes the critical need to keep global warming levels below 2°C and cap it at 1.5°C above pre-industrial levels if possible. Hence, harnessing green hydrogen can help achieve the above outcome. This is because green hydrogen is a clean energy source which, unlike coal and oil, leaves no residue in the air and only emits water vapour.

Green hydrogen possesses the capacity to decarbonize sectors such as transportation, production, and manufacturing, and significantly transform our society. However, before delving into the potential effects of green hydrogen, it is necessary to note that conclusive evidence indicating its impact may only be detected over a long period of time, owing to the field's early level of development. Market risk is one of the primary macroeconomic concerns affecting the implementation of green hydrogen projects in India, as there is currently no market for green hydrogen. As a result, the government's primary responsibility must be to take measures toward building an ecosystem that will boost both the demand and supply sides of the equation, by making hydrogen as a potential fuel alternative. Active steps have been taken to establish a green hydrogen ecosystem such as:

i) Setting up green hydrogen projects in states that have well-established steel and fertiliser industries, refineries, ports etc., to ensure a sufficient level of demand.

ii) Establishing green hydrogen projects in states that possess operational and potential renewable  energy generation capacities to guarantee an abundant supply; and

iii) Ensuring the ability to utilise the city gas distribution network for offtaking green hydrogen to prevent any obstacle between the demand and supply.

The Central Government has implemented the following flagship policies to support the aforesaid:

i) Green Hydrogen Policy (“GH Policy”), issued by the Government of India on February 17, 2022, to aid India in meeting its climate targets and incentivise its green hydrogen- producing capabilities;

ii) National Green Hydrogen Mission (“NGH Mission"), approved by the Union Cabinet with an initial financial outlay of INR 19,744 Crores for the establishment of the regulatory and policy framework; and

iii) Strategic Interventions for Green Hydrogen Transition Programme (“SIGHT”), for providing incentives for domestic manufacturing of electrolysers and production of green hydrogen.

Several states have also taken key policy measures to create a demand-supply chain for green hydrogen and its derivatives. However, the availability of cheaper polluting alternatives, uncertainty in the policy framework, and the lack of adequate research and development, have posed challenges for the green hydrogen industry.

The first section of this article addresses certain economic measures that will encourage the growth of the green hydrogen industry, while the second section discusses regulatory measures and recent developments in the field that will supplement such growth.

Economic Measures

Demand and supply are fundamental economic concepts that influence the growth of an industry. In this regard, demand refers to the number of goods or services that consumers are willing and able to purchase at a given price within a specific period, whereas supply, refers to the number of goods or services that producers are willing and able to offer for sale at different price levels. It represents the availability or production capability of a product or service. The supply of a product or service is influenced by factors like cost of production cost, technology, raw material availability, and government regulations. The growth of an industry depends on the interplay between demand and supply. When the demand for a product or service increases, it creates opportunities for businesses to expand their operations to meet the rising consumer needs. This increased demand incentivises producers to increase their supply to capitalise on the market opportunity and potentially earn higher profits. Conversely, if the demand for a product or service decreases, businesses may face challenges as there is lesser consumer interest. In such situations, producers may need to adjust their supply levels to avoid excess inventory and potential losses. This could involve reducing production, scaling back operations etc. In this section, we are discussing some commercial measures that may be undertaken to increase the demand and supply, and in turn the popularity of green hydrogen:

i) Steel Manufacturing

The use of green hydrogen in the steel industry offers significant potential for two key applications. Firstly, it can be utilised for induction in blast furnaces, to enhance the efficiency and reduce the carbon emissions associated with the steel production process. Additionally, green hydrogen can serve as an alternative reductant in the production of direct reduced iron, which can then be further processed into steel. To embark on this transformative journey, the industry can initiate the integration of a small percentage of green hydrogen into their existing processes. As cost economics improve and technology advances, the blending proportion can be gradually increased, leading to a more sustainable and decarbonised steel industry. The widespread adoption of green hydrogen in this sector will have far-reaching implications, not only in terms of environmental benefits but also in terms of driving innovation and fostering a circular economy within the steel production domain.

ii) Petroleum refining

In the petroleum refining industry, green hydrogen holds tremendous potential for the desulphurisation of various products, including diesel and petrol. By employing green hydrogen in the refining process, the sulphur content in these petroleum products can be significantly reduced, resulting in cleaner and more environmentally friendly fuels. However, the feasibility of this application is contingent upon factors such as the demand for petroleum products and the implementation of policies aimed at limiting the sulphur content in these products. To maximise the deployment of green hydrogen, it may be necessary to establish new refineries and city gas projects, thereby enabling a wider scope for integrating this sustainable energy source into the petroleum refining sector. Such endeavours will contribute to the overall decarbonisation efforts and foster a greener future for the industry.

iii) Automotive and Transportation

The automotive industry stands to benefit significantly from the utilisation of green hydrogen, particularly for heavy-duty, long-haul vehicles, as well as fuel cell electric vehicle (FCEV) buses and trucks. Green hydrogen can address the challenges associated with decarbonising transportation in these sectors by providing a clean and efficient energy source. The advantages of green hydrogen in terms of zero-emission operation, extended driving range, and quick refuelling make it an attractive option for this category of vehicles. The widespread adoption of green hydrogen in the automotive industry will not only accelerate the development of necessary projects but also necessitate the establishment of distribution infrastructure and refuelling stations along highways. These advancements will play a crucial role in supporting the growing demand for green hydrogen-powered vehicles and promoting the transition towards a more sustainable and eco-friendly transportation sector.

iv) Ports and ancillary infrastructure

Furthermore, there are additional prospects and opportunities that arise from the utilisation of green hydrogen and ammonia. These include the development of refuelling hubs specifically designed for green hydrogen and ammonia at various ports across India. These hubs would serve as crucial infrastructure for the distribution and supply of these sustainable fuels, enabling their widespread adoption in the maritime industry. In line with this, the development and operation of vessels fuelled by green hydrogen can significantly contribute to reducing emissions in the shipping sector. By embracing these alternative fuels, ships can operate with lower environmental impact, aligning with global efforts to combat climate change and promote sustainable maritime transportation. Moreover, green hydrogen can be utilised to power zero-emission technologies for vehicles and terminal equipment at ports. Another significant opportunity lies in developing supply chains and capabilities to support the future export of green hydrogen and ammonia from India. As these sustainable fuels gain traction globally, there is a growing market for their importation. By establishing efficient supply chains and fostering the necessary infrastructure, India can position itself as a major exporter of green hydrogen and ammonia, thus contributing to both its own economic growth and the global transition to renewable energy sources.

Regulatory Measures

To establish the production and use of green hydrogen as a clean energy source in India, it is crucial to develop a facilitative regulatory framework. This framework must address key considerations to ensure a smooth transition to green hydrogen. The following aspects need to be addressed:

i) Procurement of renewable energy

The production of green hydrogen requires access to a substantial amount of renewable energy. To facilitate the establishment of green hydrogen projects, fiscal and operational incentives should be provided. The Electricity (Promoting Renewable Energy Through Green Energy Open Access) Rules, 2022 (“Open Access Rules”), GH Policy, and NGH Mission, already specify certain incentives. However, relevant government agencies need to take significant actions to realise these incentives. Fiscal incentives can be provided through regulatory intervention, for allowing green hydrogen producers to purchase renewable energy on an open-access basis at favourable rates. Legislative amendments may be needed to waive applicable charges and facilitate inter-state transmission of electricity, thereby reducing operating costs for green hydrogen projects. Banking of power should also be considered, and state electricity regulatory commissions should align their regulations with the Open Access Rules and relevant policies to support energy banking.

ii) Establishment and operation of green hydrogen projects

Land availability is essential for establishing green hydrogen projects. Land can be procured through private agreements, government land rights, or private acquisition of government lands. Regulatory intervention is necessary for each scenario to ensure a smooth land acquisition process. Additionally, fostering a domestic electrolyser manufacturing ecosystem in India will lower production costs. The Ministry of New and Renewable Energy has already released incentive schemes for manufacturing electrolysers and producing green hydrogen, but further measures should be taken to promote their adoption.

iii) Storage and transportation of green hydrogen

Relevant storage infrastructure is essential for green hydrogen production. This infrastructure should include bunkers, regasification facilities, and ancillary equipment, ideally located in logistics parks or port premises. Governmental agencies such as the Ministry of Road Transport and Highways and the Ministry of Ports, Shipping, and Waterways should develop policies and guidelines for the establishment and operation of such infrastructure. Transportation can occur via shipping fleets or pipelines. However, to establish dedicated pipelines for green hydrogen transportation there is a need to make amendments to the existing regulations, as current regulations only permit the usage of pipelines for hydrocarbons.

iv) Consumption of green hydrogen

Aggregating demand through an enabling framework is crucial in the early stages of technology deployment. The government can establish bidding and procurement processes for green hydrogen and its derivatives, ensuring technology-agnostic guidelines. The quantum of green hydrogen/green ammonia consumed to meet the minimum renewable purchase obligations should be determined by the relevant electricity regulatory commission.

Recent Developments

The green energy market in India is all set to revolutionise the country. The approval of $1.5 billion in financing by the World Bank shall help India’s transition to low-carbon energy. Several other initiatives have also been implemented to promote the adoption of green hydrogen in India. One such significant move is the introduction of the Framework for acceptance of Green Deposits by the Reserve Bank of India (“RBI”) (“Green Deposits Framework”) vide its notification dated April 11, 2023. The framework is effective from June 01, 2023, and shall be applicable to:

      i) all the scheduled commercial banks (including small finance banks but excluding regional rural         banks, local area banks and payments banks); and

      ii) all deposit-taking non-banking financial companies including housing finance companies registered         with the RBI.

Several banks including HDFC Bank, DBS India, and IndusInd, have previously introduced their respective green deposit programs with an intention to use the deposit proceeds for financing green projects. Therefore, by channelling the savings of the depositors towards environmentally beneficial projects, depositors could earn potentially higher returns. However, given the absence of regulatory framework support, the RBI has launched the Green Deposits Framework to protect depositors and promote a culture of transparency and accountability. The introduction of the Green Deposits Framework is further expected to incentivise investments in the emerging sectors of green hydrogen, green buildings, electric vehicles, etc.

Furthermore, in 2015, the RBI took proactive policy measures to encourage and support green financing initiatives by adding renewable energy to its Priority Sector Lending (PSL). The New Development Bank is also actively considering opportunities to collaborate on the financing of green hydrogen projects in India. This is in line with the bank's investment focus on green infrastructure, green energy, and climate mitigation projects within the country. Currently, the New Development Bank (NDB) has granted approval to a total of 22 projects in India, amounting to approximately $7.5 billion. Moving forward, the bank will maintain a commitment to allocate 40% of its lending towards projects aimed at mitigating climate change.

Similar efforts have been taken by the Securities and Exchange Board of India (“SEBI”), in relation to green bonds. Green bonds are financial instruments which are used in environmentally beneficial projects, to raise capital and support sustainability. SEBI has recently released the Revised Disclosure Requirements for Issuance and Listing of Green Debt Securities on February 06, 2023. Nevertheless, problems continue to persist not only in its domestic implementation owing to a lack of accountability and the risk of corruption, but also due to the absence of conformity with international standards, such as the Green Bond Principles and Climate Bonds Initiative. Therefore, while the efforts of SEBI are laudable, further efforts are necessary to broaden the scope of green bonds.

The Solar Energy Corporation of India (“SECI”) has also floated a tender on July 10, 2023, for setting up a production plant of 4.5 lakh tonne per annum (4.1 lakh tonne under Technology Agnostic Pathways and 40,000 tonnes under Biomass Based Pathways) of green hydrogen in India. The SIGHT programme has been a major financial measure under the Union Cabinet’s approved NGH Mission, with projections up to 2029-30. SIGHT has proposed distinct financial incentive mechanisms for supporting the domestic production of electrolysers and green hydrogen, and SECI is the implementing authority for the scheme. Therefore, this tender has been prepared for furthering the objectives of the scheme, in line with the NGH Mission.


In conclusion, the momentum surrounding India's hydrogen transition efforts must be placed in the context of a low-carbon economy, energy security, and the nation's larger economic development goals. India’s current push towards a low-carbon economy currently hinges on an accelerated transition to a greater proportion of renewables in the electricity grid, in addition to the electrification of end uses such as transportation. However, it is widely acknowledged that certain materials crucial for industrialisation and urbanisation, such as steel, ammonia, cement, and plastic, do not have viable alternatives and cannot be effectively decarbonised solely through the use of electricity. Therefore, green hydrogen is a necessary lever to achieve a truly low-carbon economy.

For India, the transition towards adopting green hydrogen can be synergistic with the scale, ambition, and economic competitiveness of its renewable industry. Given that India has introduced financial incentives for manufacturing electrolysers, it will benefit greatly from enabling domestic manufacturing of electrolysers (and relatedly fuel cells). This will enable the nation to attain technical proficiency, participate in an emerging global market supporting the transition to clean energy, and capture a greater share of the economic benefits of this transition. Further, with the expected growth in global demand and the disparity between producing and consuming nations, the need for a hydrogen trade is bound to emerge eventually. If volume, growth and price decline expectations can be met, this hydrogen transition will allow India's industries to focus on exports of green hydrogen and hydrogen-embedded low-carbon goods such as green ammonia and green steel.

About the Authors

Mr. Avinash Khard, Partner, DSK Legal

Ms. Supriya Upadhyayula, Associate, DSK Legal

Editorial Team

Managing Editor: Naman Anand
Editors-in-Chief: Abeer Tiwari & Muskaan Singh
Senior Editor: Abeer Tiwari
Associate Editor: Muskaan Aggarwal
Junior Editor: Nalin Arora

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