Green hydrogen push faces reality check as projects struggle to take off

Nearly four years after launch, India's green hydrogen mission faces high costs, slow execution, and uncertain demand. Experts say bankable contracts and purchase mandates hold the key to success

Nearly four years after India announced its National Green Hydrogen Mission (NGHM) with a target of at least 5 million tonnes per annum (mtpa) capacity by 2030, aided by a subsidy provided under the Strategic Interventions for Green Hydrogen Transition (SIGHT) scheme, the ecosystem is still grappling to overcome structural challenges.

 

For one, project capacity is yet take off at scale, and in at least one case, companies have backed out of their committed capacity addition because of the daunting cost gap, which is almost twice that of grey hydrogen.

 

And yet, there is some progress, fuelling hopes for a cleaner hydrogen future. The long-term demand scenario has become increasingly clear, especially from the fertiliser sector, whiel  the renewable energy (RE) cost of generation has plummeted to a record low. This has led to large companies, including Reliance Industries (RIL), Adani group, and NTPC, committing $180 billion in investments.

 

However, a key question remains: Can India replicate the success of its solar power growth in green hydrogen? To answer that, one must first understand why it is crucial for India to grow the green hydrogen ecosystem.

 

For starters, green hydrogen provides a major, credible decarbonisation pathway for hard-to-abate industries such as steel, refining, fertilisers, chemicals, and long-distance transport. Thus, besides addressing climate change issues, it plays an important role in making industrial value chains less carbon-intensive, which, in turn, helps companies become globally competitive as their products are increasingly judged against their carbon footprint. The European Union's Carbon Border Adjustment Mechanism (CBAM) is a prime example of how India manufacturers face an uphill battle in developed markets.      

 

"The primary barrier remains cost. Renewable hydrogen is currently estimated to be 1.5-5 times more expensive than unabated fossil-based production. However, this gap is expected to narrow as renewable energy and electrolyser costs decline," said Nikunj Dubey, chief ratings officer at CareEdge Ratings.

 

"For India, where renewable power costs are among the lowest globally, the debate has shifted from technological feasibility to industrial positioning. The key strategic question is no longer whether green hydrogen will play a role, but which segments will achieve cost parity first and therefore capture disproportionate value as the market matures," he added.

 

The government launched NGHM with an outlay of Rs 19,744 crore in January 2023, targeting 5 MT of annual green hydrogen production by 2030. The SIGHT programme supports both electrolyser manufacturing and green hydrogen production. While multiple allocation rounds have awarded manufacturing capacity and production incentives to companies, execution still lags ambition.

 

According to Jatin Kochhar, partner at law firm Clavius Legal, India can still see a solar kind of success but not by simply copying the solar model.

 

"Solar worked because SECI, a creditworthy government buyer, signed long-term contracts that banks were willing to lend against, and because electricity could be sold into a grid that already existed," points out Kochhar.

 

Green hydrogen is harder. Its buyers are refineries and fertiliser plants that must change the way they operate, which means entire new plants, not to mention storage and distribution pipleines, have to be built.

 

"India already has the tools that made solar work: competitive auctions, SECI as the buyer in the middle, and transmission charge waivers. What green hydrogen still needs is a legal requirement to buy it and contracts that banks can trust," says Kochhar.

 

Another key factor holding back green hydrogen is the dismal pace of implementation. As of July 2026, the Ministry of New and Renewable Energy told Parliament that no plant supported under the subsidy scheme had been fully commissioned. Only about Rs 292 crore of allocated Rs 19,744 crore - less than 1.5 per cent - had been spent by August. Outside the subsidy scheme, about 8,000 tonnes a year of capacity had been commissioned by February 2026 - versus a target of 5 MT by 2030 - and these, too, were mostly pilot and in-house projects. So, while the policy framework is largely in place, the task ahead is to convert on-paper plans into working plants.

 

Then there is the lack of a mandate for hydrogen consumption or purchase obligation for companies. The largest buying programme so far is SECI's green ammonia round: about 724,000 tonnes a year was allocated across 13 fertiliser units, and agreements for 670,000 tonnes a year with 11 units were signed in March 2026.

 

"A green hydrogen consumption obligation for refineries and fertiliser plants has been discussed for years but is yet to be notified," noted Kochhar. "The Renewable Consumption Obligation notified in September 2025 covers only electricity use by distribution companies, open access consumers and captive users, which can include these plants, not their total energy use. It also counts green hydrogen or green ammonia only when used as energy, not as a raw material, and these plants use them mainly as a raw material."

 

The lack of a legal obligation remains a key gap with solar, where buyers were legally required to purchase renewable power. "A phased green hydrogen mandate with clear yearly targets, and support to cover the price gap in the early years, would do the same for hydrogen," says Kochhar.

 

But even a legal obligation may not be enough. Experts argue that contracts must also work for lenders. SECI's green ammonia contracts run for 10 years, but the plants will operate for 20 to 25 years and that gap makes refinancing riskier and borrowing more expensive. Lenders will also look closely at equipment performance guarantees, minimum purchase commitments, protection against changes in law, payment security, and compensation that covers their loans if a contract is terminated, says Kochhar. Standard contract terms and longer contract periods would help project finance more than just another round of subsidies. In fact, solar went through a similar painful birthing experience with delayed payments and attempts to reopen signed contracts; those lessons could help point the way forward for green hydrogen, too.

 

Other experts agree that the existing cost gap with respect to grey hydrogen, uncertainty of demand pick-up, and the absence of enabling infrastructure are key challenges for green hydrogen to make a meaningful headway in the RE sector.

 

"This is a typical Catch-22 situation between production-cost optimisation vs demand pick-up. The SIGHT programme under National Green Hydrogen Mission aims to address this challenge by incentivising electrolyser manufacturing and green hydrogen and ammonia production. In addition to developing underlying infrastructure and hubs, introducing GH2 Purchase Obligations (GPO) on industries in a phased manner and a Contracts for Difference (CFD) framework to balance out cost of GH2 sourcing can accelerate scale-up of domestic hydrogen sector," said Anujesh Dwivedi, partner, Deloitte India.

 

According to him, the green hydrogen sector in India is expected to reach an inflection point sometime in the next 2-4 years. However, it is only likely to become competitive one sector at a time, likely starting with fertiliser.

 

"SECI's auctions discovered green ammonia prices of Rs 49.75 to Rs 64.74 per kg for about 724,000 tonnes a year. The lowest bid was within about 10 per cent of the grey ammonia price of USD 515 per tonne in March 2025, and it is fixed for 10 years, which protects an import-dependent sector from price swings," said Kochhar.

 

Refineries will follow in the early 2030s. The lowest refinery price so far is Rs 279 per kg, which is still well above grey hydrogen. According to Rocky Mountain Institute, production costs could fall by about 46 per cent by 2030, from about $4.40 to $2.40 per kilogramme. "In my view, refineries are more likely to reach unsubsidised parity in the early 2030s than by 2030. Steel, shipping and transport will take until the mid-2030s, unless carbon pricing speeds things up," Kochhar says.

 

India has one of the cheapest renewable power in the world, a proven auction system, and strong commitment from large companies. Nonetheless, solar did not succeed only because panels became cheaper, it succeeded because contracts became bankable. Green hydrogen, too, will need more of the same, and its future will decided less in factories and more in purchase contracts, legal mandates, and dispute resolution clauses.