India’s finance ministry wants lower energy prices for green steel incentives

NEW DELHI: India’s finance ministry wants green hydrogen prices to soften before deciding on financial support for production of steel using clean energy, two sources familiar with the matter said, as New Delhi seeks to control inflation and its expenditure.

Indian steel producers have been asking for federal incentives as the nation considers mandating the use of a certain percentage of green steel in government projects.

India, the world’s biggest steel producer after China and a key green house gas emitter, has been working on a green steel policy to decarbonise production of the alloy.

A delay in the launch of federal financial support could slow India’s energy transition plans to meet 2070 net zero goal. The steel ministry is seeking incentives from the finance ministry for decarbonisation efforts.

The finance ministry has argued that high green hydrogen costs would make use of green steel unviable and ‘potentially inflationary’, the sources told Reuters. The deliberations between the two ministries have been slowed, as the finance ministry has cautioned against a “hasty approach,” one of the sources said, declining to be identified as discussions are not public.

“Steel is an intermediate product and manufacturing green steel would be costly and there is a need to have a balanced approach between growth and sustainability,” the source said, referring to the finance ministry’s thinking.

India’s finance and steel ministries did not respond to Reuters’ emails seeking comments. Currently, a majority of Indian steel mills depend on coal for their blast furnace operations. The steel ministry has touted the use of green hydrogen as an alternative but high costs are a deterrent.

In December, India said steel produced with carbon dioxide emissions of less than 2.2 tonne per tonne of finished steel would be defined as “green steel”.

Steel producers in India, the world’s fastest-growing major economy, generate 2.55 metric tons of carbon dioxide per ton of crude steel produced, 38% higher than the global average of 1.85 tons, according to Global Energy Monitor.