Announcing the ‘first budget of the Amrit Kaal’, Finance Minister Nirmala Sitharaman reinforced India’s commitment to sustainable development and green growth. The Budget emphasised on the need to reduce the carbon intensity of the economy through green fuel and green vehicles.
Labeling ‘Green Growth’ as one of the Saptarishis guiding us through the Amrit Kaal, the Budget sounds promising for accelerating India’s journey towards its net zero goal. However, while the Rs 35,000 crore priority capital investment for net zero and energy transition will be a major tailwind for decarbonizing the economy, the details of its implementation plan are awaited.
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By 2030, India is set to be the third largest consumer of energy globally. In the business-as-usual scenario, India’s net dependency on imported oil is likely to increase from 75% to 90% by 2040.
The Budget has rightly acknowledged the role of green hydrogen as a critical component of our energy transition and green growth. Besides decarbonising hard-to-abate industrial sectors, green hydrogen is imperative for reducing our reliance on fossil fuel imports and encouraging our technology and innovation ecosystem. The green hydrogen production capacity envisioned for 2030 is anticipated to leverage total investment of over Rs. 8 lakh crore and generate over 6 lakh full-time green jobs, which is another thrust area for the green growth of the economy.
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The Budget has reinforced the outlay of Rs. 19,744 crore for the National Green Hydrogen Mission that targets 5 million metric tonnes of production by 2030. This would require an additional renewable energy capacity of at least 125 GW, which is almost the entire current capacity of renewables in India.
The Budget has also announced Rs 20,700 crore for the construction of a transmission network for evacuating 13 GW of renewable energy from Ladakh, which can help accelerate the adoption of green hydrogen. Since India has already achieved record-low tariffs for renewable energy, further bolstering renewable capacity expansion and setting up robust transmission connectivity are critical to achieving low-cost green hydrogen as 60-75% of its cost comes from renewable power production. More focus should be laid on creating co-located production and consumption hubs to eliminate costs accrued due to transmission of renewable power for green hydrogen production.
According to NITI Aayog, the electrolyser market is set to be approximately $5 billion by 2030 and $ 31 billion by 2050. The Mission is already working on the introduction of incentives for domestic electrolyser production and/or custom duty exemptions on electrolyser imports to scale green hydrogen production. We hope for a speedy announcement of these incentives to kickstart the creation of a green hydrogen economy.
Green hydrogen has immense untapped potential to fulfil India’s ambition to meet 50 per cent of its energy needs through renewable energy and cut down overall projected carbon emissions by a billion tonnes by 2030. One of the key objectives of the Mission includes lowering India’s carbon footprint by about 50 MMT. With its potential usage as a transportation fuel, green hydrogen can significantly reduce transport sector emissions as road transport alone is responsible for 87% of total transport emissions.
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The Budget has announced the identification of 100 transport infrastructure projects for end-to end connectivity for ports, coal, steel and fertiliser industries, which will be pivotal in adoption and scaling of green hydrogen. That said, the Budget could have emphasised more on demand creation measures and pilot project demonstrations for new applications like green steel, shipping, transport, railways and ports.
As a way forward for a robust India’s green hydrogen ecosystem, we must now emphasise on creating a strong regulatory framework, safety regulations and robust quality and performance requirements. These measures will help stabilise the private sector's long-term investment outlook in tandem with our technological advancements.
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(Pawan Mulukutla is Director, Integrated Transport, Electric Mobility and Hydrogen, WRI India. Views are personal. )