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, debate and regulatory road maps, India may finally be close to entering the growth phase of Carbon Capture, Utilisation and Storage (CCUS), 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 of China — CCUS technology is critical as a decarbonisation solution for sectors that contribute more than 70 per cent to 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 effort, the Budget for 2026-27, presented on February 1, announced a ₹20,000 crore outlay for CCUS over the next five years, fuelling hopes of specific action areas soon. 

“Over the next five years, a realistic expectation of CCUS capacity creation would be between 10 million tonnes 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,” said Atanu Mukherjee, chief executive officer  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," he added, referring to industries such as steel, aluminium and fertilisers. 

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

Catalytic signal 

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 & development (R&D) testbeds to sustained, commercial-scale operations, the report said. For CCUS to achieve broad adoption, the technology needs to operate at a meaningful commercial scale in sectors that contribute the most to carbon 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,” said Mukherjee. "The real opportunity lies in applied research and innovation that have 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 carbon 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. 

Fast tracking investment 

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, operational plants capture carbon in a range between 1 mt and 2 mt per annum. 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, at around $30 or ₹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 carbon capture capacity is likely to require around ₹900 crore-₹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 carbon to methanol at its Vindhyachal 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 to capture 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. 

Meagre capture 

Despite the recent momentum, some experts believe there is still a long way to go before  CCUS is deployed rapidly. According to energy thinktank 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 the 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,” said Vikram Vishal, convenor, National Centre of Excellence in Carbon Capture & Utilisation (NCoE-CCU), Indian Institute of Technology (IIT) Bombay. 

Highlighting the urgency of developing technologies like CCUS, the 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. 

Green pathway

• Move towards commercial-scale CCUS backed by ₹20,000 crore Budget allocation
• Build 10–15 mt CCUS capacity over 5 years for 4–6 large projects in hard-to-abate industries
• Expand storage, link CCUS to carbon markets, build shared transport and storage infrastructure, enable affordable financing
• Pilots already launched involving NTPC, ONGC, and Tata Steel
• Success will depend on clear incentives, global technology partnerships, and sustained investment