India's upcoming national budget will divert fossil-fuel subsidies towards green hydrogen: reports
Developers call for purchase mandates on industry and cutting taxes for H2
Green hydrogen could see a major boost from the Indian government’s upcoming 2024-25 budget, due to be unveiled on 1 February, according to local reports.
Subsidies are set to be diverted from supporting the production of carbon-intensive fuels to clean H2, reports Indian businesses newspaper The Economic Times, citing “industry insiders”, adding that the budget is likely to increase the scale of government support for H2 and include demand-side incentives.
The previous budget included 197.44bn rupees ($2.4bn) to support green hydrogen. Of this, 174.9bn rupees went towards the first auctions for H2 production and electrolyser manufacturing capacity, with another 14.66bn rupees set aside for pilot projects “in emerging end-use sectors and production pathways”.
However, the domestic industry is calling for incentives beyond simply increasing the budget of the next auctions.
“Introducing Green Hydrogen Purchase Obligations (GHPOs) would create a guaranteed market for green hydrogen developers, catalyzing investments and reducing project risks,” Bikesh Ogra, CEO of renewables developer Jakson Green told Indian business newspaper Mint.
“This forward-thinking policy is crucial to unlocking the vast potential of green hydrogen in sectors like transportation and green ammonia production.”
India’s government has gone back and forth on whether it will introduce a mandate for certain industries — such as oil refining, fertilisers, steel and cement — to use a minimum percentage of renewable H2 or ammonia in their overall consumption.
However, a firm decision is yet to be made, with ministers for affected sectors reportedly pushing for lower purchase obligations.
Others are calling for lower goods and services taxes (GST) on hydrogen and electrolyser manufacturing.
“Lowering the GST rate for hydrogen to, for instance, 5%, makes it more affordable for various sectors, including transportation and industry,” Derek M Shah, head of Larsen & Toubro’s green energy business, told Mint.
He also called for reducing the GST on electrolyser manufacturing from 18% to “a competitive rate” such as 5%.
Larsen & Toubro has won subsidies to cover 63MW of electrolyser manufacturing capacity in India’s latest auction, although it had applied for 300MW.
However, its joint venture with ReNew Power and Indian Oil, GH4India, was unsuccessful in a bid for incentives to cover 10,000 tonnes a year of green H2 production capacity.
Manish Dabkara, chairman and managing director of carbon credits firm EKI Energy Services similarly told Mint: “Our expectations extend to the reduction of duties on electrolysers, increased budgetary allocation for batteries and electrolysers under the Production Linked Incentive (PLI) scheme, and a revision of GST rates for the renewable energy sector, critical aspects, unfortunately, missing from previous budgets.”