Policy Powerhouse: Incentives for Green Hydrogen in India’s Sustainable Shift

Introduction: India’s Strategic Imperative for a Green Hydrogen Future

India is positioning itself as a global leader in green hydrogen, a critical pillar of its sustainable energy transition. The National Green Hydrogen Mission (NGHM), launched in 2023 with an overarching outlay of ₹19,744 crore (approximately $2.4 billion USD), is driving this ambition with a robust framework of policy incentives designed to scale production, reduce costs, and foster innovation. This mission is pivotal to achieving energy independence by 2047 and net-zero emissions by 2070. Backed by significant financial commitments and complemented by proactive state-level initiatives, these policies are creating a fertile ecosystem for green hydrogen to flourish.

At SORT Consultancy, we recognize that this isn't just about environmental goals; it's about a strategic shift that will lead to significant decarbonization of the economy, reduced dependence on fossil fuel imports, and enable India to assume technology and market leadership in green hydrogen. This blog explores the key national and state-level incentives, situates India’s efforts in a global context, and highlights recent developments shaping the sector’s vibrant future.

National-Level Incentives – The NGHM’s Pillars of Support

The NGHM is the cornerstone of India’s green hydrogen strategy. Its ambitious targets for 2030 include establishing a green hydrogen production capacity of 5 Million Metric Tonnes (MMT) per annum, developing 125 GW of associated renewable energy capacity, attracting over ₹8 lakh crore (~$100 billion USD) in investments, and creating over 6 lakh jobs. It also aims for a cumulative reduction in fossil fuel imports worth over ₹1 lakh crore and abatement of nearly 50 MMT of annual CO₂ emissions. The mission's initial phase (2022-23 to 2025-26) lays the crucial groundwork for these ambitious goals.

1. Strategic Interventions for Green Hydrogen Transition (SIGHT) Programme

The SIGHT Programme is the NGHM's flagship financial lever, allocated a substantial ₹17,490 crore (approximately $2.1 billion USD). This fund is strategically divided into two core components:

• Incentives for Manufacturing of Electrolyzers: Recognizing the imperative for self-reliance and cost reduction, a significant portion of SIGHT is dedicated to boosting domestic electrolyzer manufacturing capabilities. These incentives aim to attract both domestic and international players to set up gigafactories in India. As of May 2025, the MNRE has already awarded incentives for 3,000 MW per annum of electrolyzer manufacturing capacity to 15 firms, including major players like Reliance, L&T, BHEL, and Ohmium. This initiative directly contributes to the 'Make in India' movement, fostering a robust domestic supply chain.

• Incentives for Production of Green Hydrogen: To bridge the "green premium" (the cost gap between green hydrogen and its fossil fuel-derived counterparts), SIGHT offers direct financial support for green hydrogen production. This mechanism helps de-risk initial projects and makes green hydrogen more economically viable for end-users. These incentives are designed to gradually step down over three years (e.g., ₹50/kg in the first year, ₹40/kg in the second, and ₹30/kg in the third year). By May 2025, tenders for incentives supporting 862,000 tonnes per annum (TPA) of green hydrogen production have already been awarded to 19 companies, demonstrating strong industry uptake.

2. Key Regulatory and Financial Enablers

Beyond direct financial incentives, India's policy framework includes critical regulatory easements and support mechanisms:

• Waivers on Inter-State Transmission System (ISTS) Charges: For green hydrogen projects commissioned by December 31, 2030, a 25-year waiver on ISTS charges for renewable energy (RE) used in production significantly reduces energy costs. This is particularly impactful for large-scale green hydrogen projects that rely on remote, resource-rich RE sites, lowering the overall delivered cost of renewable power.

• Renewable Energy Banking: Policies enabling the storage and withdrawal of RE credits are crucial for addressing the intermittency of solar and wind power. This ensures a consistent and reliable power supply for electrolyzers, optimizing production cycles. State-specific banking policies, learning from models in Maharashtra, Andhra Pradesh, and Gujarat, are also evolving.

• Open Access and Connectivity (Green Energy Open Access Rules, 2022): The Green Energy Open Access Rules, 2022, streamline approvals for RE projects dedicated to green hydrogen. These rules facilitate direct procurement of renewable electricity by producers, bypassing traditional distribution channels, thereby ensuring faster connectivity and greater flexibility in securing competitive power for large-scale projects.

• Exemption from Environmental Clearance: In a significant move, green hydrogen and green ammonia plants have been exempted from mandatory environmental clearance by the Ministry of Environment, Forest, and Climate Change. This policy decision significantly de-risks and accelerates project development by reducing regulatory hurdles.

• Financial Support for Pilot Projects: The government has allocated substantial funds for early-stage innovation and market creation. This includes ₹496 crore for transport pilot projects (e.g., hydrogen-powered buses, trucks, and railway trials) and ₹200 crore for establishing essential testing facilities by the fiscal year 2025–26. These funds are vital for de-risking new applications, gathering operational data, and creating initial demand in hard-to-abate sectors.

3. Production Linked Incentive (PLI) Scheme

The PLI scheme, a proven success in other manufacturing sectors, is being leveraged as a game-changer for green hydrogen infrastructure:

• For Electrolyzers: The scheme incentivizes large-scale domestic manufacturing of electrolyzers, driving technological advancements, achieving economies of scale, and significantly reducing import dependency.

• For Green Hydrogen Production: Direct incentives under PLI reduce production costs, enhancing competitiveness against grey hydrogen and positioning India as a cost-effective global supplier.

Standards, Certification & Innovation: Building Trust and Future Readiness

India’s policy framework extends beyond financial incentives to ensure quality, credibility, and technological advancement:

• Development of Standards and Regulations: India is committed to developing robust frameworks for safety, quality, and interoperability. The Bureau of Indian Standards (BIS) has already published 88 standards for various aspects of hydrogen, from production and storage to safety and transportation.

• Green Hydrogen Certification Scheme of India (GHCI): A critical development, launched in April 2025, is the formal introduction of the Green Hydrogen Certification Scheme of India (GHCI). This scheme sets a stringent emission limit of 2 kg CO₂e per kilogram of hydrogen, averaged over 12 months, and mandates verifiable renewable electricity usage. The Bureau of Energy Efficiency (BEE) is designated as the verification body, ensuring transparency, preventing greenwashing, and crucially, building confidence for both domestic and international markets.

• Technological Advancement & Indigenous R&D: Recognizing the need for continuous innovation, the NGHM promotes a public-private partnership framework for R&D (Strategic Hydrogen Innovation Partnership – SHIP). Significant investments, such as the IIT Delhi's ₹500 crore grant for green hydrogen research, underscore the focus on indigenous technological development.

State-Level Policy Landscape – Regional Drivers of Growth

India’s states are actively complementing national efforts with tailored incentives, leveraging their unique geographical advantages and industrial bases to attract investment and foster regional green hydrogen ecosystems. A recent CEEW study highlights that state-level policies could unlock an additional ₹5 lakh crore (~$61 billion USD) in incentives.

• Gujarat: A frontrunner in renewable energy, Gujarat offers attractive land subsidies, reduced water tariffs, and a robust single-window clearance system to streamline project approvals. Its large industrial base, including refineries and chemical plants, provides ready demand, making it an attractive hub for green hydrogen investments.

• Maharashtra: Maharashtra has unveiled a comprehensive green hydrogen policy aiming to establish at least 500 KTPA production capacity by 2030. Incentives include targeted tax breaks, capital subsidies, and a strategic focus on developing specific green hydrogen clusters around its industrial zones and ports. As of May 2025, MEDA has invited bids for 130 KTPA of green hydrogen production facilities, including direct production subsidies (e.g., ₹50 per kg for blending with CNG/PNG).

• Tamil Nadu: Leveraging its extensive coastline and strong industrial corridors, Tamil Nadu is proactively identifying and promoting green hydrogen clusters, offering tailored incentives to support large-scale green hydrogen and green ammonia projects, particularly for export.

• Other States (e.g., Karnataka, Rajasthan, Odisha, Andhra Pradesh):

  • • Karnataka: Exploring innovation hubs and R&D for green hydrogen.

    • Rajasthan: Leveraging vast solar resources for large-scale RE projects linked to green hydrogen production.

    • Odisha & Andhra Pradesh: With significant industrial assets and coastlines, they are emerging as key players for industrial decarbonization (e.g., steel, fertilizers) and export-oriented green ammonia production. Odisha alone accounts for 38% of announced green hydrogen capacity in India.

    • States like Bihar have also recently (July 2025) launched new Renewable Energy Policies incorporating green hydrogen promotion, offering incentives like stamp duty exemptions, land conversion charge waivers, and energy banking.

Policy Driving Demand Creation & Infrastructure Development

Policy interventions are not just about production; they are strategically designed to create demand and build the necessary infrastructure.

• Demand Creation in Hard-to-Abate Sectors: Policies encourage the transition of existing "grey" hydrogen consumers to green.

  • • Refineries: Major oil & gas PSUs (IOCL, BPCL, GAIL) are leading the charge. For example, BPCL has commissioned its first green hydrogen plant at Bina Refinery, and GAIL's Vijaipur plant produces 4.3 TPD. Policy aims for a replacement of 6.3 MMT of grey hydrogen by 2035 in refineries.

    • Fertilizers: Policies are driving decarbonization in this sector, targeting a reduction of 45 MMT in annual emissions.

    • Steel: Pilot projects are underway with major players like JSW and Tata Steel exploring green steel pathways.

    • Mobility: The ₹496 crore pilot projects are supporting the deployment of 37 hydrogen vehicles (buses and trucks) and 9 hydrogen refueling stations, signaling direct government support for the transport sector.

• Blending Quotas: Discussions are ongoing for implementing mandates for blending green hydrogen into conventional hydrogen and piped natural gas supplies, creating guaranteed initial demand.

• Infrastructure Development (Green Hydrogen Hubs & Corridors): The NGHM supports the identification and development of Green Hydrogen Hubs, with an initial outlay of ₹400 crore for hubs and other projects until 2025-26. Key ports like Kandla, Paradip, and Tuticorin are being developed as green hydrogen export hubs. Plans for hydrogen pipelines, dedicated storage, and integration with smart grids are also underway.

International Benchmarks & Global Context

India’s proactive policy stance is not in isolation; it’s part of a global race for green hydrogen leadership, positioning India as a key player in the international clean energy transition.

• USA’s Inflation Reduction Act (IRA): The IRA offers a significant Clean Hydrogen Production Tax Credit (45V) of up to $3/kg. While structured differently, India's SIGHT program and PLI scheme aim to achieve similar cost reductions, with an ambitious target of bringing down green hydrogen production costs to around $2/kg (approx. ₹160-₹165/kg), positioning India to be globally competitive.

• EU’s REPowerEU Plan: The European Union's REPowerEU plan sets ambitious targets for both domestic green hydrogen production and substantial imports, aiming for 20 MMT of green hydrogen consumption by 2030. This creates a significant global demand pull, aligning with India's export ambitions. India is actively engaged in collaborations like the India-EU Green Hydrogen Corridor and EU-India Cooperation on Waste to Renewable Hydrogen Innovation, further strengthening its global partnerships. India is also in FTA discussions with Europe to reduce import duties on Indian green hydrogen.

Recent Updates & Forward-Looking Policy

India's green hydrogen policy framework is dynamic, constantly evolving to meet industry needs and global developments.

• Tangible Allocations: The specific allocations of ₹496 crore for transport pilot projects and ₹200 crore for testing facilities (until FY 2025-26) are concrete examples of immediate policy impact, supporting early adopters and building critical infrastructure.

• GHCI Implementation: The formal launch and implementation of the Green Hydrogen Certification Scheme of India (GHCI) in April 2025 is a crucial step for ensuring quality and international acceptance.

• Global Harmonization of Standards: India’s active engagement in international dialogues for harmonizing green hydrogen certification and safety standards will facilitate cross-border trade and build global confidence in Indian-produced green hydrogen.

Private Sector Engagement & Investment

The robust policy framework has ignited significant interest and investment from the private sector, both domestic and international.

• Key Indian Players: Major Indian conglomerates like Reliance Industries (planning a 1 GW green hydrogen facility in Jamnagar), NTPC, L&T, IOCL, BPCL, GAIL, Adani, ACME, and Greenko are aggressively investing in large-scale green hydrogen and electrolyzer manufacturing projects, often forming strategic partnerships (e.g., L&T with McPhy, Thermax with Ceres).

• Global Investments: International players like TotalEnergies and Fortescue are also exploring significant investments in India's green hydrogen landscape, recognizing the conducive policy environment.

• Startups and Innovation: A vibrant ecosystem of startups is emerging, supported by R&D incentives and pilot projects, contributing to localized solutions and technological advancements.

Addressing Challenges Through Policy

While the momentum is strong, India’s policies are also designed to address inherent challenges:

• Cost Competitiveness: SIGHT and PLI schemes directly target the reduction of the "green premium" to make green hydrogen economically viable compared to fossil fuels.

• Water Scarcity: Policies encourage the use of treated wastewater, desalinated water, and non-freshwater sources for electrolysis, mitigating concerns in water-stressed regions.

• Financing Gap & Demand Uncertainty: Direct incentives, pilot projects, and future blending mandates aim to de-risk investments and create predictable demand.

Conclusion: India’s Unwavering Commitment to a Green Hydrogen Future

India’s green hydrogen sector is powered by a dynamic policy framework that blends substantial financial incentives, comprehensive regulatory support, and proactive state-level innovation. The NGHM’s SIGHT programme and PLI schemes are creating a cost-competitive environment, while crucial regulatory easements like ISTS waivers and the new GHCI scheme ensure compliance and global market access.

The synergistic efforts of national initiatives and forward-thinking state policies, coupled with strong private sector engagement, are transforming India’s green hydrogen aspirations into tangible realities. By strategically leveraging these policy levers and learning from global benchmarks, India is not merely striving for energy security and decarbonization; it is firmly establishing itself as a global powerhouse for green hydrogen production, consumption, and export. As of mid-2025, the policy framework is clear, the financial commitments are substantial, and the industry is responding, charting a decisive course towards a sustainable, self-reliant, and prosperous future.

Partner with SORT Consultancy to Navigate India’s Green Hydrogen Policy Landscape

Are you ready to seize the immense opportunities presented by India's burgeoning green hydrogen sector? Understanding the intricacies of national and state-level policy incentives is crucial for maximizing your project's viability and success.

✅ SORT Consultancy offers expert guidance to:

• Demystify policy frameworks: Get clear, actionable insights into the NGHM, SIGHT program, PLI schemes, and various state-specific incentives to optimize your project planning.

• Optimise financial incentives: We help you identify and secure the most relevant subsidies, grants, and waivers to enhance the economic attractiveness of your project.

• Navigate regulatory pathways: Ensure seamless project execution by understanding and complying with all green hydrogen-related regulations, including the new certification standards.

📩 Email us at: [info@sortconsultancy.com]

📊 At SORT Consultancy, we empower your sustainable growth in India’s green energy revolution.