Introduction 

India has committed to achieving net-zero carbon emissions by 2070, with interim targets including a 45% reduction in the carbon intensity of its economy by 2030 from 2005 levels, and the installation of 500 gigawatts (GW) of non-fossil fuel electricity capacity. Given the industrial sector accounts for 24% of the country’s energy-related greenhouse gas (GHG) emissions, its decarbonisation is essential to meeting these national climate goals. 

Among industrial subsectors, steel is one of the most energy and emissions intensive, making it a critical focus area for mitigation efforts. India is the world’s second-largest steel producer, generating approximately 150 million tonnes (Mt) of crude steel in 2024. The sector contributes about 12% of the country’s total carbon dioxide (CO₂) emissions, with steel output projected to rise to 255Mt by 2030 in response to growing domestic infrastructure and manufacturing demand. This expansion, while economically vital, poses a significant risk of locking in high-emission technologies if decarbonisation measures are not urgently adopted.

Steel production in India is divided between two distinct technological routes. The integrated route, used chiefly by large corporates, relies primarily on the blast furnace-basic oxygen furnace (BF-BOF) process, which depends on coking coal and iron ore as key inputs in the production process. The secondary route, which accounts for about 55% of total steel output in the country, is dominated by micro, small and medium enterprises (MSMEs) that use coal or gas-based direct-reduced iron (DRI) and electric arc furnaces (EAFs) or induction furnaces (IFs). These MSMEs are concentrated in states such as Jharkhand, Chhattisgarh and West Bengal, and are often characterised by small-scale operations, limited financial resilience, and outdated high-emission technologies.

India’s Ministry of Steel published a detailed decarbonisation roadmap in 2024, outlining short-, medium- and long-term measures to reduce emissions across the sector. The roadmap categorises decarbonisation solutions based on the production technologies used in the sector. This segmentation offers a clear pathway for both large integrated steel producers (ISPs) and MSMEs.

However, while this segmentation provides clarity, implementing these solutions will be both capital and technology intensive. While larger ISPs usually have the balance sheet strength and institutional capacity to adopt these technologies, MSMEs, already operating under financially precarious conditions, will face significant challenges. 

The Need for Targeted Support to Decarbonise Steel MSMEs

Although the Government of India and several global development partners have launched financing schemes and energy efficiency programs targeting the broader MSME sector, their impact on MSME decarbonisation has been limited. As a result, there remains a critical gap in accessible and effective financial support for this high-emitting but underserved segment.

Additionally, the decarbonisation of steel sector MSMEs is also critical from a socio-economic perspective. These entities are significant employers in economically vulnerable regions, supporting local livelihoods and contributing to regional development. Without targeted support, they risk being excluded from India’s low-carbon transition, threatening jobs, deepening regional disparities and undermining the broader goals of a just energy transition.