The Pulse | Economy | South Asia

Green Hydrogen: India’s Big Ambitions, Costly Realities

India’s green hydrogen ambitions are running up against high production costs, infrastructure gaps, and uncertain domestic demand, even as the government seeks to position the country as a global export hub.

Green hydrogen could play a key role in India’s clean energy transition, particularly in sectors where direct electrification is difficult. 

Green hydrogen (GH) is produced by splitting water using renewable energy, while grey hydrogen is made from natural gas, releasing significant carbon dioxide emissions. GH can replace grey hydrogen in fertilizers and refineries, coal in steelmaking, and fossil fuels in parts of the chemicals, petrochemicals and heavy transport sectors, including shipping. Besides reducing emissions, it can lower dependence on imported fossil fuels and industrial feedstocks, limit exposure to global price volatility and strengthen energy security. However, large-scale adoption will depend on costs, end-use efficiency, and supporting infrastructure. 

Recognizing GH as a strategic energy carrier, the government of India launched the National Green Hydrogen Mission (NGHM) in January 2023. The mission aims to make India a global hub for GH production, use and exports, with a target of at least 5 million tonnes (Mt) of annual production by 2030.

By December 2025, the government had awarded incentives for 0.862 million tonnes per annum (MTPA) of production capacity and 3,000 MW per annum of electrolyzer manufacturing. The awarded GH production capacity represents only about 17 percent of the 2030 target.

Cost remains a major barrier to large-scale GH adoption in the domestic market. The International Energy Agency (IEA) has also highlighted this challenge. Its recent report says uncertain demand and project delays, partly due to slow infrastructure development, mean GH is unlikely to become cheaper than grey alternatives in the near future.

To address costs, NGHM provides short-term subsidies and policy support to incentivize production. It has also identified three ports – Deendayal, V.O. Chidambaranar and Paradip – as GH hubs to coordinate production, storage, handling and shipping for potential exports. 

Under NGHM, 174,900 million Indian rupees have been allocated to the Strategic Interventions for Green Hydrogen Transition (SIGHT) program. Declining production subsidies on GH (50 rupees to 30 rupees per kg) and green ammonia (8.8 rupees to 5.3 rupees) are available for only three years. They cover only 10-15 percent of the green-grey cost gap and are intended as a temporary incentive. Electrolyzer manufacturing incentives are spread over five years, declining from 4,440 rupees to 1,480 rupees per kW.

Long-term sustainability will require measures beyond subsidies. These include creating demand in hydrogen-consuming industries through a Green Hydrogen Production Obligation; reducing production costs through cheaper renewable energy and domestic electrolyzer manufacturing, supported by performance-linked incentives; and developing export markets along with carbon pricing for grey hydrogen

Renewable energy is a major cost component (50-70 percent of GH production costs), particularly when round-the-clock supply is required. To lower production costs, encourage domestic adoption and strengthen India’s export competitiveness, the government has notified the waiver of Inter-State Transmission System (ISTS) charges for eligible GH and green ammonia projects.

According to WITS data, India imported hydrogen worth $871,700 in 2024, while exports amounted to $17,400. Nigeria was the largest destination for Indian hydrogen exports (45.8........

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