Steel without the energy security challenge: India’s green hydrogen opportunity

India’s plan to reach 300 million tonnes per annum (mtpa) of crude steel capacity by 2030 comes at a time when the country still relies on imports for about 90% of its metallurgical (met) coal. Despite efforts to become more self-reliant in coal, most new steel capacity is being built through the coal-intensive blast furnace (BF) route, which depends heavily on imported met coal. As a result, 182mtpa of BF capacity currently planned or under construction would require an extra 140mtpa of met coal, significantly increasing India’s exposure to global coal prices and supply risks, as highlighted by a recent IEEFA report.

Green hydrogen as a strategic alternative

India is boosting domestic met coal through Mission Coking Coal, targeting 140 million tonnes (mt) by 2030 from 66mt in 2025. However, S&P Global expects the coking coal deficit to persist as steel capacity expands, indicating that higher domestic supply alone will not eliminate import dependence, thereby strengthening the case for alternative steelmaking routes.

One option is direct reduced iron–electric arc furnace (DRI–EAF), which reduces reliance on met coal by using natural gas or green hydrogen. While gas-based DRI lowers coal use, it continues to depend on imported gas. Meanwhile, green hydrogen, produced from domestic renewables, offers a more durable solution by reducing reliance on both coal and gas. Rising demand supports this: EY projects green steel demand at 4.49mt by 2030, with steelmaking potentially requiring around 5mt of hydrogen by 2030.

Policy support and falling costs can accelerate this transition

Bain & Co estimates that requiring 10–15% green steel in public procurement could create 0.4–0.6mt of hydrogen demand by 2030, helping attract private investment. This matters given today’s cost gap between green hydrogen (USD4–12 per kg) and grey hydrogen (USD1–2 per kg). While projects have slowed globally, BloombergNEF notes that India remains one of the few countries where green hydrogen could become cost-competitive in the 2030s.

Momentum is building as JSW Energy commissioned India’s first commercial-scale green hydrogen plant, supplying 3,800tpa to JSW Steel’s Vijayanagar DRI facility. Backed by a seven-year offtake agreement under the SIGHT programme, the project ensures demand and shows the integration of green hydrogen into steelmaking using domestic renewables and reducing import risk.

India’s cost advantage is also emerging: An IOCL tender in June 2025 discovered prices of INR 397 per kg (USD4.67 per kg), competitive globally and close to Middle East prices. This has  reinforced policymakers view that India could emerge as one of the world’s lowest-cost green hydrogen producers by 2030.

Export ambitions face headwinds

India has expressed ambitions to supply 10% of global green hydrogen exports, but the pathway remains uncertain. Exporting hydrogen typically requires conversion to ammonia, specialised transport and reconversion, adding costs and complexity. As a result, the delivered costs are often higher than for domestic use.

At the same time, differences in global standards and definitions for green hydrogen are limiting its emergence as a traded commodity. IEEFA notes that these inconsistencies could constrain Indian exports, especially under the EU’s RFNBO rules.

Recent developments reflect these challenges: SECI’s tender for two hydrogen hubs (100,000mtpa each) was cancelled in mid-2025. While industry remain optimistic about long-term prospects, weak export demand driven by policy reversals and geopolitical uncertainty has slowed expansion, shifting government focus toward building domestic demand.

Domestic use ensures energy security

Statements by government officials suggest India may fall short of its 2030 green hydrogen production target of 5mtpa, with revised expectations closer to 3mtpa, shifting policy focus toward domestic demand. In this context, domestic steel offers a dependable and scalable pathway for hydrogen use, strengthening energy security. India–Sweden pilot projects are testing hydrogen in steel and cement, focusing on technologies suited to Indian conditions and smaller producers. This aligns with TERI’s findings that hydrogen in rotary kilns can lower costs, suit Indian ores, and operate flexibly with renewables, making it especially relevant for coal dependent steel MSMEs.

Policy ideas to scale green hydrogen use in steel

To support India’s steel transition while strengthening energy security, targeted policy action will be essential. Green public procurement can anchor early demand for domestically produced green steel, creating price signals and reducing project risks. hydrogen purchase obligations could similarly require steelmakers to source a minimum share from green hydrogen. Oman, despite having low-cost gas, already mandate 10–15% green hydrogen use in new DRI plants. Hydrogen-steel clusters can further reduce costs through co-location. Finally, targeted public finance will be essential to mobilise private investment, as early-stage green steel projects still depend on concessional support.

This article was first published in The Hindu Business Line