"India Explores Funding Options for Green Steel Projects"

India is accelerating efforts to finance green steel projects, heralding hydrogen as a transformative alternative to conventional coal-based methods. Deliberations are ongoing regarding various proposals, including the potential implementation of reduced interest rates tailored specifically for forthcoming capital-intensive green steel ventures.

Green steel, distinguished by its minimal carbon footprint, has emerged as a focal point of India's sustainable industrial aspirations.

A senior official familiar with the discussions revealed that options such as adjusting existing financing rates by banks are being considered. For instance, for green steel projects meeting predefined criteria, there is a possibility of a slight reduction in interest rates from the current standard rates.

"Numerous ministerial clearances are necessary, and financial institutions must also be brought on board for this proposal to materialize," the official remarked.

Establishing a green steel plant incorporating hydrogen technology is perceived to entail roughly double the expenditure of traditional steel plants. While the construction cost for a conventional steel plant with a one-million-tonne annual capacity is estimated at $1 million, setting up a similar green steel plant ranges between $2-2.5 million.

India's Steel Ministry has also advocated for a consortium-based approach to establishing steel projects utilizing green hydrogen. Under this framework, projects facilitated through consortiums or industry associations could receive funding or support of up to 70 per cent of the project cost, contingent upon obtaining necessary clearances.

India's steel sector currently contributes to 12 per cent of the country's greenhouse gas emissions, with an emission intensity of 2.55 tonnes of CO2 per tonne of crude steel produced, exceeding the global average of 1.9 tonnes.

As part of the National Green Hydrogen Mission, the Steel Ministry has been allocated ₹455 crore. Initial scheme guidelines, issued in February, outline a call for proposals for pilot projects, with funding available until 2029-30.

Three key areas have been identified for pilot projects in the steel sector: utilizing hydrogen in the Direct Reduced Iron-making process, integrating hydrogen in blast furnaces, and progressively substituting fossil fuels with green hydrogen.

Under the scheme, funding will cover up to 50 per cent of the total project cost, primarily focusing on capital expenditure requirements. Funds will be disbursed in three stages, with stringent measures in place to ensure timely project completion and proper fund utilization. Failure to meet project deadlines or fund diversion will necessitate the refund of the entire grant.

HBL