India set for mega investment boom in CCUS, but scale remains a challenge

A ₹20,000 crore outlay in Budget 2026 may accelerate commercial-scale carbon capture, utilisation and storage projects as India balances industrial growth with its 2070 Net Zero goal

After years of interventions at the pilot stage and debate over policy and regulatory roadmaps for Carbon Capture, Utilisation and Storage (CCUS), India may finally be close to entering the growth phase marked by the implementation of commercial-scale projects to reduce the carbon footprint of high-emission industries.

 

Despite India's per capita emissions being only 1.9 tonnes per annum — about 40 per cent of the global average and one-fourth that of China — CCUS technology is critical as a decarbonisation solution for sectors that contribute more than 70 per cent of the country's emissions. That, in turn, is linked to the larger national goal of achieving Net Zero by 2070 while maintaining industrial competitiveness in the face of global carbon regulations.

 

As part of that, Budget 2026 announced a ₹20,000 crore outlay for CCUS over the next five years, fuelling hope of specific action areas soon.

 

"Over the next five years, a realistic expectation of CCUS capacity creation would be between 10 million tonnes (MT) and 15 MT, possibly up to 20 MT if projects move efficiently. Even achieving 10 MT would be a strong start. Once a few million-tonne-scale projects are operational, replication becomes much easier," says Atanu Mukherjee, chief executive officer (CEO) of energy consultancy firm M N Dastur. "From an investment perspective, this would require roughly ₹15,000 crore over the next five years to support 4–6 carbon capture and storage projects in hard-to-abate sectors, delivering close to 10 MT of capacity."

 

The firm has prepared a report titled "CCUS Policy Framework and its Deployment Mechanism in India" for NITI Aayog, the government's policy think tank, and is already working on a few commercial-scale domestic CCUS projects, including the value chain design for Indian Oil Corporation (IOCL) refineries, in collaboration with the Asian Development Bank (ADB).

 

As things stand, at least 5–6 projects across hard-to-abate sectors in high-emission states need support through capital allocation mechanisms that enable capture, transportation, storage, and conversion. This is expected to send a strong catalytic signal and help shift the focus from small pilots and research and development (R&D) test beds towards sustained, commercial-scale operations, the report recommends. For CCUS to achieve broad adoption, the technology needs to operate at a meaningful commercial scale in sectors that contribute the most to industrial emissions.

 

"The priority now should not be on the invention of entirely new concepts as CCUS is built on technologies that have been proven for decades," says Mukherjee. "The real opportunity lies in applied research and innovation that has a multiplier impact on economics and scale — smarter system integration, better process design, modularisation, materials optimisation, digital monitoring, and operational efficiency jumps. Leapfrogging in these areas will be critical to driving down costs, improving reliability, and enabling deployment at increasingly larger scale."

 

Besides the focus on R&D and innovation, rapid deployment of CCUS project capacity will require getting it right in three other areas. First, policy planners need to focus on the storage aspect of the CCUS value chain. While India has significant storage potential, it requires detailed exploration and adequate budgetary support so that demonstration and commercial projects can move forward. Second, CCUS must be linked to evolving carbon markets and carbon trading systems, which will help price carbon dioxide and drive decisions around capture, transport, and storage. Finally, for it to scale, CCUS must become an infrastructure utility. This means moving towards shared infrastructure models for CO₂ transportation and storage, similar to water utilities or electricity grids.

 

"The starting point will be demonstration projects or large, commercial-scale projects anchored through the proposed ₹20,000 crore support. These would act as anchor projects across different sectors. However, for CCUS to truly scale, the infrastructure needs to be financed — including pipelines, storage facilities, and capture equipment — and it needs to be financed at attractive rates. We have proposed the creation of a Carbon Capture Finance Corporation, which would leverage sovereign support to lower the cost of capital. Because these are carbon-related investments, instruments such as carbon bonds or green bonds, backed by sovereign support, can significantly lower financing costs," Mukherjee said.

 

Other experts believe the budgetary allocation for building CCUS infrastructure is a welcome move, particularly for sectors like power, steel, cement, refineries, and chemicals. "However, the specific incentive mechanism structure and global technology collaborations would be key monitorables to fast-track investments in this space," said Pranav Master, senior practice leader and director, Crisil Intelligence.

 

Globally, including projects in the US, operational plants capture carbon in a range between 1 MT and 2 MT in a year. The ExxonMobil Shute Creek facility in the US, the world's largest, operates at 6–7 mtpa capacity. From a cost perspective, the IOCL refinery project has one of the lowest capture costs at scale, around $30 per tonne, or roughly ₹2,500 per tonne, according to Mukherjee. Broadly, the capex required for setting up CCUS projects depends on the sector and the nature of emissions. In India, setting up 1 MT per annum of CO₂ capture capacity is likely to require around ₹900 crore–Rs 1,000 crore. This can be lower in some cases, such as coal gasification, and higher in others.

 

On the domestic front, NTPC commissioned a 20 tonne per day (TPD) carbon capture plant in 2022, which converts CO2 to methanol at its Vindhyachal Super Power Station. Oil and Natural Gas Corporation (ONGC) also recently announced a CCUS pilot at its Gandhar oilfield in Gujarat. The project will capture carbon from nearby industrial units in the Dahej region and ONGC’s Hazira plant and inject around 100 TPD of carbon into two depleted onshore wells for underground storage. It will also test the use of carbon dioxide for enhanced oil recovery (EOR). In 2021, Tata Steel commissioned a 5 TPD CCUS pilot at its Jamshedpur plant, capturing carbon from the blast furnace. Similarly, JSW Steel is operating a 100 TPD CCUS facility at its Dolvi direct reduced iron (DRI) plant, where captured carbon is refined for use in the food and beverage industry.

 

Despite the recent momentum, some experts believe there is still a long way to rapid deployment of CCUS. According to energy think tank Ember, annual global carbon emissions stand at 38.6 billion tonnes but all the operational CCUS facilities across the world have captured less than 50 MT of carbon annually, which translates into a meagre 0.13 per cent of global emissions.

 

“Although technology readiness level (TRL) is high for many capture, conversion and geological sequestration options, India has not really tried it at scale. The country needs to find suitable technologies which can be deployed at scale with government support,” says Vikram Vishal, convenor, National Centre of Excellence in Carbon Capture & Utilisation (NCoE-CCU), Indian Institute of Technology (IIT) Bombay.

 

Highlighting the urgency to develop technologies like CCUS, NITI Aayog said in a report earlier this month that the central challenge before India on its development journey is to strike a balance between the Viksit Bharat agenda, which envisions increasing GDP to $30 trillion by 2047, and achieving Net Zero greenhouse gas emissions by 2070.