India’s ambitious plan to decarbonize its steel sector faces a potential delay, as the Finance Ministry has expressed reservations about extending financial incentives for green steel production. The primary concern is the high cost of green hydrogen, a key input for producing green steel, which officials argue makes the process economically unviable at present.
According to sources, the ministry is worried that premature subsidies could be inflationary and place unnecessary pressure on public finances. While the steel industry is central to India’s net-zero emissions goal by 2070, officials believe that green steel technologies need to become more cost-effective before they can be supported at scale.
“The cost of green hydrogen remains prohibitively high and subsidizing it now could distort the market without delivering tangible climate gains,” a senior official told. “The focus should instead be on reducing energy input costs through broader reforms and innovation.”
This cautious stance comes as steelmakers such as Tata Steel and JSW Steel have already begun pilot projects to test green steel manufacturing in India. However, industry insiders suggest that without federal incentives, scaling up will remain a challenge.
The delay in rolling out green steel incentives could slow the industry’s transition to low-carbon production, particularly when global competitors are already benefiting from climate-related subsidies in the EU and U.S.
Despite these concerns, the Ministry of Steel and the Ministry of Renewable Energy continue to engage in cross-departmental discussions to arrive at a sustainable and phased roadmap for supporting green steel in India, one that balances environmental goals with economic realities.
