Success of National Green Hydrogen Mission relies on a blend of innovation, investment and policy reforms

Success of National Green Hydrogen Mission relies on a blend of innovation, investment and policy reforms

The mission attempts to make India a global player in the green hydrogen industry. 

Energy

Success of National Green Hydrogen Mission relies on a blend of innovation, investment and policy reforms

Water and biomass are the key raw materials for manufacturing green hydrogen in India

Saumya Singh, Aakash Bajpai

Published:24th Mar, 2025 at 5:46 PM

Green hydrogen is a promising sector across the world. It carries immense potential to reduce emissions and help combat climate change. With India pledging to become a net-zero economy by 2070, the scope of such green initiatives has been magnified. 

The Union government launched the National Green Hydrogen Mission in 2023 to facilitate the production and adoption of green hydrogen across the country's sectors. 

The mission attempts to make India a global player in the green hydrogen industry. It entails India exporting about 10 million metric tonnes (MMT) of green hydrogen/green ammonia by 2030 per annum, which will entail a share of about 10 per cent in the global market. 

This year’s budget allocates significant funds to the National Green Hydrogen Mission as this is the last fiscal year of Phase 1 of the Mission, which focuses on capacity building. However, there are challenges to deal with, as manufacturing Green Hydrogen is costlier than manufacturing Grey Hydrogen. 

National Green Hydrogen Mission

The National Green Hydrogen Mission acknowledges the risks associated with the availability of raw materials and other key components required for the project. It states that water and biomass are the key raw materials for manufacturing green hydrogen in India. 

Hence, setting up a supply chain based on the circular economy could significantly help in risk management. 

What makes hydrogen ‘green’ is the input of sustainable energy that aids manufacturing. The Ministry of New & Renewable Energy has set the definition of Green Hydrogen to include a well-to-gate emission limit of no more than 2 kg carbon dioxide equivalent per kg of hydrogen. 

This encompasses all processes from water treatment to electrolysis, gas purification, drying, and compression of hydrogen. According to the U.S. Department of Energy, the biomass could be sourced from agricultural-forestry residues & organic wastes, and the water could be sourced from industrial & municipal effluents. 

Extracting water and biomass from effluents and residues could help address the issues revolving around wastage and pollution while giving a fillip to the circular economy as well.

Experts opine that manufacturing biomass-based green hydrogen is relatively cost-effective as compared to the water-based one, as the energy required to break the bond of hydrogen and oxygen is immense. 

Therefore, backward linkages in the supply chain of green hydrogen that integrate the farmlands with the manufacturing plants could help increase farmers' income and reduce air pollution. Hence, more funds need to be channeled for Research & Development in this domain which lead to an increase in the efficiency of the manufacturing processes.

Budget insights

The Budget 2025-26 appears to have given further impetus to the National Green Hydrogen Mission.

The Budgetary Estimate for the National Green Hydrogen Mission in FY 2023-24 was about 297 crores. However, the Actual Expenditure was about Rs 100 crore only. Similarly, the Budgetary Estimate for FY 2024-25 was about Rs 600 crore, but the Revised Estimate was only about Rs 300 crore. 

The data regarding its Actual Expenditure is not available yet. This year again, the government has proposed a Budgetary Estimate for FY 2025-26 of about Rs 600 crore.

However, past experiences indicate that mere allocation of funds is not enough; its efficient utilisation is crucial as well. This is especially imperative when the sector is facing issues of cost optimisation, and governmental spending could help rejuvenate the projects and processes.

Apart from the fiscal grants, private-sector investments are also required to power the National Green Hydrogen Mission. However, driving private funds to this sector faces the challenge of low return on investments. 

To resolve this, alternative ways of financing green projects need to be worked out. This is where establishing the Green Banks could help. The research indicates that commercial banks issue loans at higher interest rates and for a shorter duration of time while most of the green projects take a longer duration to breakeven. 

This is especially true for developing economies, where the interest rates are comparatively higher than the developed economies. Green Banks gain access to capital from a variety of sources, such as grants and dedicated investment instruments, which reduce their cost of capital. Consequently, they help finance green projects via specialised and customised credit schemes. 

The government could take a step forward by establishing a Green Bank that could finance several green hydrogen projects in the country.

The carbon markets also provide a way to finance green projects that reduce the emissions of greenhouse gases. To foster investments from the developed countries, India has notified Green Hydrogen projects to be eligible for carbon trading under Article 6 of the Paris Agreement.

However, challenges remain with the US exiting the Paris Agreement. Therefore, India needs to forge more bilateral partnerships to enable carbon trading under Article 6 of the Paris Agreement. 

As countries across the globe attempt to draft the certification criteria to enable international carbon trade in hydrogen and its derivatives, India needs to develop its own benchmarks in line with the global standards that help secure finances through carbon credits.

Efficiently utilising the allocated funds, along with strengthening carbon markets and fostering private investments, is critical to this sustainability journey. Strategic policy reforms aligning to promote in-house technological innovation and international collaborations will help overcome financial and technical challenges. Ultimately, the success of the National Green Hydrogen Mission relies on a blend of innovation, investment and policy reforms. 

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