23 February 2023

An Overview Of The Green Hydrogen Policy Framework

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The Institute for Energy Economics and Financial Analysis (IEEFA) reported that investments in the Indian renewable energy sector touched an unprecedented figure of USD 14.5 billion...
India Energy and Natural Resources
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The Institute for Energy Economics and Financial Analysis (IEEFA) reported that investments in the Indian renewable energy sector touched an unprecedented figure of USD 14.5 billion in the financial year 2021-22, a 125% jump compared to net investments reported in year 2020-21.1 As per the Ministry of Power, the trend is likely to continue, and the investments are predicted to surge to USD 25 billion in 20232. The expansion of the Indian renewable energy sector is a reflection of the larger global shift towards clean energy and the potential for opportunities in the sector.

Presently valued at about USD 1 trillion, the global market for clean energy is expected to double by 2030.3 Clearly, the incentives for major players to mobilize into the renewable energy sector are high. Major national companies such as Reliance Industries, Renew Power, Indian Oil, L&T, Adani Enterprises, and the ACME Group are in various stages of entering the green hydrogen space.

In 2021, the Prime Minister, Narendra Modi announced the National Hydrogen Mission (Hydrogen Mission). The Hydrogen Mission is geared towards transforming the nation into a global hub for the production of green hydrogen, a clean fuel widely regarded as an alternative to fossil fuels and an indispensable step in the decarbonization of industries. The Hydrogen Mission targets the production of 5MMT of green hydrogen by the year 2030 and was approved by the Union Cabinet in January 2023 with an initial outlay of INR 19,744 crores4. Notably, after the announcement of the Hydrogen Mission in 2022, the Ministry of Power notified the Green Hydrogen Policy, 2022 (Green Hydrogen Policy) setting out initiatives to invite green hydrogen manufacturers and ease the production process. The Hydrogen Mission and the Green Hydrogen Policy constitute a great leap forward that has triggered significant anticipation and activity in the industry.

In line with the Hydrogen Mission, the Union Budget 2023 has opened doors for rolling out the National Green Hydrogen Mission. The budget outlays INR 19,700 crores for the National Green Hydrogen Mission. The objective is to ease the transition to a low-carbon economy by producing five million metric tons (MMT) of green hydrogen by 2030. This mission could revolutionize India's energy industry, lowering the nation's reliance on fossil fuels and paving the way for a greener, more sustainable future.5


The implementation of the Hydrogen Mission has been divided into two distinct phases – phase I & II. Each phase has been prescribed its own set of objectives, with phase I consisting of foundational measures and phase II involving the deployment of more advanced green hydrogen-based technologies in hard-to-abate sectors.6

The first phase of the Hydrogen Mission will commence in the year 2022-23 and is proposed to conclude in 2025-26.7 In the initial stage of the Hydrogen Mission, the goal will be the adoption of green hydrogen in sectors that already rely on hydrogen, such as refineries, fertilizer manufacturing, and the city gas sector. The adoption of green hydrogen in these sectors is expected to lead to domestic demand creation and induce corresponding increases in supply, which would be facilitated by the Hydrogen Mission through the expansion of domestic electrolyser manufacturing capacity.

Further, the first phase will encourage research and development for adoption of green hydrogen in hard-to-abate sectors.8 Pilot projects for the green transition of steel production and heavy-duty transport will be undertaken to ease the shift in the subsequent phase of the Hydrogen Mission. Phase II of the mission shall commence in the year 2026-27 and is proposed to conclude in the year 2029-30. The highlight of this phase is the anticipated cost-competitiveness of green hydrogen with fossil-fuel based alternatives in the refinery and fertilizer sector. Further, under this phase, the possibilities of commercial-scale green hydrogen-based projects in steel, mobility, and shipping sectors will be explored.        


The Hydrogen Mission's initial outlay of INR 19,744 crore is compartmentalized for development of different facets of the green hydrogen ecosystem.9 Broadly, the Hydrogen Mission is designed to facilitate demand, production, utilization, and export of green hydrogen and the outlay has been divided accordingly. The largest portion of the outlay, amounting to INR 17,490 crore, has been set aside for the Strategic Interventions for Green Hydrogen Transition Programme (SIGHT), a programme focused on addressing supply side constraints in green hydrogen production channels. The second largest portion of the outlay, standing at INR 1,466 crore, has been reserved for funding the pilot projects. Lastly, INR 400 crores has been allotted for R&D initiatives for the development of globally competitive green hydrogen technologies.

The larger objective of the Hydrogen Mission can be broken-down into three heads: demand creation, supply-side interventions, and initiatives for an enabling ecosystem10. The objectives of the Hydrogen Mission have been analyzed below:

    1. Export Markets: The global demand for green hydrogen and its derivatives is estimated to reach 100MMT by the year 2030.11 In the face of international demand, India, with its low-cost green hydrogen, can emerge as a leading exporter. The Hydrogen Mission aims to tap into the export markets to generate demand and potentially export about 10MMT of green hydrogen ~ 10% of the global demand by 2030.
    2. Domestic Markets: In the domestic markets, there is an annual demand of 5MMT of grey hydrogen, which is hydrogen produced from natural gas or methane.12 A majority of this grey hydrogen is utilized in the petroleum refining and ammonia manufacturing sectors, where it can be easily replaced with green hydrogen, especially once price-competitiveness is achieved. Moreover, under the policy framework envisioned under the Hydrogen Mission, the government will prescribe a minimum share of consumption of green hydrogen and its derivates by designated consumers to increase domestic demand.
    3. Competitive Bidding for Procurement: To improve demand in the initial stages of the Hydrogen Mission, the Ministry of New and Renewable Energy (MNRE) will frame guidelines for the creation of a transparent and competitive bidding process for green hydrogen procurement.13 The bidding process would help in the attainment of scale and stability in long-term agreements.
    4. Domestic Manufacture of Fertilizers: Upon achievement of cost-competitiveness in green hydrogen prices, there may be an incentive to reduce reliance on fertilizer imports14 equivalent to an amount of USD 6 Consequently, under the Hydrogen Mission, it is proposed that a call for competitive bids for the establishment of green hydrogen-based fertilizer plants in the country would be appropriate. It is targeted that through the competitive bidding process, 2 (two) green hydrogen-based urea plants and 2 (two) green hydrogen-based diammonium phosphate (DAP) plants would be established.
    1. Strategic Interventions for Green Hydrogen Transition: The largest portion of the outlay, amounting to INR 17,490 crore, has been reserved for SIGHT.15 The SIGHT programme's objective is the expansion of the green hydrogen production capacity of the domestic renewable energy industry. SIGHT's incentive mechanism is two-pronged. First, it targets the domestic manufacturing capacity of electrolysers and second, the green hydrogen production capacity. Further, the government in the union budget of 2023, has proposed two distinct financial incentive mechanisms to support the manufacturing of electrolysers and offers incentives for green hydrogen production with an outlay of INR17,490 crores up to the year 2029-30.16 
    2. Hydrogen Hubs: The Hydrogen Mission proposes the establishment of green hydrogen hubs to work around the logistical challenge of transporting green hydrogen from the production sites to the projects.17 The establishment of green hydrogen hubs would concentrate key infrastructure in geographically proximate areas. The Hydrogen Mission aims to develop at least 2 (two) green hydrogen hubs in its initial phase, which shall also help in launching late-stage pilot projects in steel production, mobility, and other hard-to-abate sectors.
    1. Regulations, Codes, and Standards: The Hydrogen Mission proposes the creation of a robust regulatory framework, safety codes, and quality standards in-line with the international norms to ensure interoperability of the technologies employed and the integration of best practices.18 The existing regulations and approvals shall be streamlined for ease of business and new processes will be established where there exists a regulatory gap. To ease the regulatory process further, the Hydrogen Mission also proposes time-bound approvals for pilot projects, creation of a portal for the consolidation of all regulations and standards, establishment of testing and certification facilities, and the target of notifying all necessary standards and regulations by the year 2023-24.
    2. Research and Development: The Hydrogen mission classifies research projects into three categories based on the take-off time: short-term (0-5 years), mid-term or grand challenge projects (0-8 years), and long-term or blue-sky projects (0-15 years)19. The Hydrogen Mission extends support to identified short-term projects targeting innovations pertaining to domestic manufacturing of electrolysers and related technology. The mid-term projects will have a focus on technologies that eases licensing challenges and supply constraints, while the long-term projects will be directed towards creation of technologies that would generate a competitive advantage for the Indian industry. In addition to this allotment, the Hydrogen Mission also envisions a policy framework for public-private partnership in green hydrogen research. This framework, which is yet to be formulated, has been titled - Strategic Hydrogen Innovation Partnership (SHIP). The objective of SHIP is to fuel goal-oriented, time-bound, and scalable R&D projects for the creation of globally competitive green hydrogen technologies.


In line with the goals of the Hydrogen Mission, a significant portion of the Green Hydrogen Policy deals with initiatives that encourage the production of green hydrogen. These initiatives can be divided into the following categories:

  1. Grant of connectivity to the Inter-State Transmission System and waiver of inter-state transmission charges: The Green Hydrogen Policy stipulates that green hydrogen projects are to be granted connectivity to the Inter-State Transmission System (ISTS) on a priority under the Electricity (Transmission System Planning, Development and Recovery of Inter-State Transmission Charges) Rules, 2021.20 Further, it provides for a waiver of ISTS charges for a period of 25 (twenty-five) years for green hydrogen manufacturing projects commissioned before 30 June 2025.
  2. Grant of open access for sourcing renewable energy and regulation of open access charges: Under the Green Hydrogen Policy, green hydrogen plants are to be granted open access for sourcing renewable energy within 15 (fifteen) days of receipt of a complete application and the charges for open access are regulated.21
  3. Permission to power bank and regulation of banking charges: The Green Hydrogen Policy permits banking for the renewable energy used in green hydrogen production for a period of 30 (thirty) days and the charges for power banking are regulated to not exceed the cost difference between the average tariff for renewable energy during the preceding year and the average market clearing price in the Day Ahead Market (DAM)22.
  4. Allotment of land and establishment of manufacturing zones: The Green Hydrogen Policy also provides for allotment of land within renewable energy parks for green hydrogen projects and the creation of manufacturing zones for such projects.23
  5. RPO compliance relaxations: The Green Hydrogen Policy prescribes that the renewable energy used for the manufacture of green hydrogen would be counted towards the RPO compliance of the manufacturer.24
  6. Margin of distribution licensees regulated: In case the distribution licensees supply renewable energy to the producers of green hydrogen, the Green Hydrogen Policy limits their charge to the cost of procurement and regulates the margin via the state commission.
  7. Establishment of a single portal for all clearances and permissions: Under the Green Hydrogen Policy the MNRE is required to establish a single portal for all clearances required for manufacture, transportation, storage, and distribution of green hydrogen.25


The goal of the Green Hydrogen Policy is to facilitate the realization of the Hydrogen Mission. The Hydrogen Mission seeks to advance various agendas on different fronts of national development. But the foremost target of the Hydrogen Mission is the production of at least 5MMT of green hydrogen by the year 2030.26 The expected outcomes upon the successful realization of the mission include27:

  1. Addition of 125 giga watts to the renewable energy capacity of the country.
  2. Reduction of INR 1 lakh crore in fossil fuel imports.
  3. Abatement of 50 MMT of annual greenhouse gas emissions.
  4. Generation of over 6 lakh new jobs in the next decade.
  5. An estimated sum of INR 8 lakh crores in investments.

The Green Hydrogen Policy and the Hydrogen Mission represent a multi-billion-dollar bet on green hydrogen powering the future. In its 2022 report on green hydrogen, the NITI Aayog outlined the advantageous position that India enjoys for the large-scale production of green hydrogen and the impetus for their utilization.28 Given India's capacity to produce cheap and abundant renewable energy, along with its ability to manufacture low-cost electrolysers, the government's bet on green energy is natural. As per the findings of the NITI Aayog, the success of the Hydrogen Mission depends most on whether India is able to outdo other potential hubs in terms of producing economical green hydrogen29.

Describing an optimistic outlook for India arising as global champion of green hydrogen production, the action plan drawn out in the report primarily suggests measures for complete exploitation of India's ecosystem advantages. Some of the most consequential milestones that the industry must realize to achieve the expected outcomes of the Hydrogen Mission are30:

  1. The creation of a stable long-term market for green energy with sustained demand.
  2. Reduction of output cost of green hydrogen to $1/kg. In other words, price-competitiveness with fossil fuels.
  3. Scaling up of the manufacturing infrastructure to support a capacity of at least 25GW to meet domestic demand and have room for export.


The Green Hydrogen Policy and the Hydrogen Mission are well timed for early action, especially considering the goal of outdoing green hydrogen hubs across the world in terms of output costs. The cost of electrolysers is predicted to reduce and simultaneously, the efficiency of the electrolysers is also predicted to improve making green hydrogen the preferred alternative to fossil fuels. Further, India is amongst the few nations that have put money on the table for development of the green hydrogen industry.31 While the bulk of the funds allotted will help jump-start domestic manufacturing of essential infrastructure under the program, the policy measures will play a vital role in inviting investments from businesses32.


1 Garg V (IEEFA 2022) rep

2 PTI, “Renewable Energy Sector to Attract $25 Billion in Investments in 2023” (December 22, 2022) <> accessed January 10, 2023

3 Vision Research (Vision Reports 2020) rep

4 “Cabinet Approves National Green Hydrogen Mission” accessed January 8, 2023

5 “Budget 2023: Outlay of Rs. 17,400 crore announced for Green Hydrogen Mission” (February 1, 2023),low-carbon%20economy%20with%20its%20net-zero%20mission%20of%202070. accessed February 2023

6 Ministry of New and Renewable Energy, “The National Hydrogen Mission” (MNRE January 13, 2023) accessed January 13, 2023

7 ibid

8 ibid

9 Ministry of New and Renewable Energy, “The National Hydrogen Mission” (MNRE January 13, 2023) accessed January 13, 2023

10 ibid

11 ibid

12 ibid

13 ibid

14 ibid

15 ibid

16 “Boost for Green Hydrogen in Union Budget 2023” (February 10, 2023),incentive%20schemes%20and%20programs%20will%20continue%20to%20evolve accessed February 2023.

17 Ministry of New and Renewable Energy, “The National Hydrogen Mission” (MNRE January 13, 2023) accessed January 13, 2023

18 ibid

19 ibid

20 “Ministry of Power Notifies Green Hydrogen/ Green Ammonia Policy” <> accessed January 10, 2023

21 ibid

22 ibid

23 ibid

24 ibid

25 ibid

26 Cabinet Approves National Green Hydrogen Mission (n 4)

27 ibid

28 NITI Aayog and RMI, “Harnessing Green Hydrogen : Opportunities for Deep Decarbonization in India”

29 ibid

30 ibid

31 Prasad R, “India's $2-Billion Green Hydrogen Mission Needs Push from Government: Industry” (Moneycontrol2023) <> accessed January 10, 2023

32 Cabinet Approves National Green Hydrogen Mission ( n 4)

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