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In a bold move to address climate change while maintaining industrial growth, India has launched the National Green Steel Mission (NGSM), a comprehensive initiative aimed at decarbonizing one of the country’s most carbon-intensive sectors. With an ambitious budget of ₹15,000 crore, this mission represents India’s commitment to achieving its net-zero emission targets by 2070 while ensuring the steel industry remains competitive globally.
The Steel Challenge
Steel production has historically been among the most carbon-intensive manufacturing processes worldwide. In India, the sector is responsible for a significant portion of industrial emissions, presenting both an environmental challenge and an opportunity for transformative change. As global markets increasingly demand sustainable products, greening India’s steel industry has become not just an environmental imperative but an economic necessity.
Funding the Green Transition
The ₹15,000 crore NGSM employs a multi-faceted funding approach designed to support the industry’s transition while addressing the inherent financial challenges of adopting new technologies:
Direct Government Support
At the heart of the funding strategy is direct financial support from the Union Budget through the Ministry of Steel. These allocations will provide crucial backing for various decarbonization initiatives, including research and development of new technologies and processes that reduce the carbon footprint of steel production.
Production-Linked Incentives (PLIs)
A cornerstone of the mission’s funding architecture is the PLI scheme specifically tailored for green steel production. This performance-based financial incentive system rewards steel manufacturers who successfully reduce emissions in their production processes, creating a direct economic benefit for adopting cleaner technologies.
Strategic Reallocation
Demonstrating fiscal innovation, the government plans to repurpose approximately ₹3,000 crore of unused funds from earlier initiatives, such as the PLI for specialty steel. This reallocation ensures efficient use of existing resources while directing them toward urgent decarbonization priorities.
Synergy with the National Green Hydrogen Mission
The NGSM is strategically aligned with India’s National Green Hydrogen Mission, which has earmarked ₹455 crore specifically for pilot projects in the steel sector. These projects focus on substituting traditional fossil fuels with green hydrogen in steelmaking processes, potentially revolutionizing production methods.
Renewable Energy Support
Recognizing that a transition to green steel requires clean energy, the mission includes subsidies and grants promoting renewable energy adoption in steel production. With renewable energy expected to constitute 43% of the sector’s energy mix by 2030-31, these incentives are critical to achieving the necessary infrastructure transformation.
Market-Based Mechanisms
The Carbon Credit Trading Scheme (CCTS), introduced in 2023, creates an additional funding stream by enabling steel producers to monetize their emission reduction efforts through carbon credit trading. This market-based approach rewards early adopters and incentivizes continuous improvement in environmental performance.
Creating Market Demand
Through Green Public Procurement (GPP) mandates, government agencies are now required to purchase green steel, creating guaranteed demand that justifies private sector investments in decarbonization technologies. This policy creates a virtuous cycle where public procurement drives innovation and scale in green steel production.
Supporting Smaller Players
Acknowledging the unique challenges faced by Micro, Small, and Medium Enterprises (MSMEs) in this transition, the mission includes specific provisions such as capital subsidies for equipment upgrades and tax credits for renewable energy investments, ensuring that smaller players aren’t left behind in the industry’s transformation.
Technological Pathways to Decarbonization
The NGSM focuses on several key technological approaches to reduce emissions:
Green Hydrogen Integration
Perhaps the most promising frontier in steel decarbonization is the use of green hydrogen as a reducing agent in place of coal and natural gas. The mission supports multiple pilot projects focused on producing Direct Reduced Iron (DRI) using 100% hydrogen, potentially eliminating a major source of carbon emissions.
Energy Efficiency Improvements
Through the Perform, Achieve and Trade (PAT) Scheme, the mission incentivizes steel manufacturers to implement energy efficiency improvements that reduce both costs and emissions, creating immediate economic benefits alongside environmental gains.
Circular Economy Promotion
The Steel Scrap Recycling Policy (2019) and Vehicle Scrapping Policy (2021) aim to increase the availability of domestically generated scrap metal, promoting a circular economy approach that significantly reduces the carbon intensity of steel production compared to primary steelmaking.
Renewable Energy Adoption
Leveraging India’s abundant renewable resources through the National Solar Mission and other initiatives, the steel sector is encouraged to transition its energy sources away from coal toward solar, wind, and other clean alternatives.
Benefits Beyond Carbon Reduction
While carbon reduction is the primary goal, the NGSM delivers multiple co-benefits that strengthen its case:
Environmental Improvements
Beyond climate impacts, the transition to cleaner steel production technologies promises significant improvements in local air and water quality, reducing pollution-related health problems in communities surrounding steel plants.
Economic Opportunities
The green transition is expected to create numerous jobs in renewable energy, technology development, and infrastructure, potentially offsetting any employment disruptions in traditional steelmaking processes.
International Competitiveness
As global markets increasingly demand sustainable products and potentially implement carbon border adjustment mechanisms, India’s green steel initiative positions its industry to remain competitive in a carbon-constrained global economy.
Technological Leadership
By investing in cutting-edge decarbonization technologies, India has the opportunity to develop expertise that can be exported globally, creating new revenue streams and establishing the country as a leader in sustainable industrial processes.
Challenges and Considerations
Despite its promise, the path to green steel faces several challenges:
High Initial Costs
The transition to low-carbon technologies typically involves significant upfront investments, creating financial barriers particularly for smaller players in the industry.
Technology Readiness
Some key decarbonization technologies, particularly those involving green hydrogen, are still evolving and may require further development before widespread commercial adoption is feasible.
Policy and Regulatory Hurdles
Harmonizing various policies and ensuring regulatory frameworks support rather than hinder the transition remains an ongoing challenge that requires careful attention.
Transition Period Management
Managing the interim period as the industry transitions from conventional to green technologies requires careful planning to avoid disruptions in steel supply or economic impacts.
The Path Forward
The success of India’s National Green Steel Mission will depend on continued collaboration between government, industry, and research organizations. By fostering innovation, creating appropriate market signals, and providing targeted support, India can transform one of its most carbon-intensive sectors into a model of sustainable industrial development.
As global pressure to address climate change intensifies, India’s proactive approach to decarbonizing its steel industry not only addresses environmental imperatives but also positions the country to thrive in a low-carbon future. The National Green Steel Mission represents not just a response to climate challenges but a strategic vision for industrial competitiveness in a changing world.
Through this comprehensive approach to funding and implementation, India’s steel industry stands poised to demonstrate that economic growth and environmental stewardship can go hand in hand—forging not just steel, but a sustainable industrial future.
