India's Green Hydrogen Sector Pushes For Policy Shift in Budget 2026

With Budget 2026 around the corner, India’s green hydrogen ecosystem is pushing for a decisive policy shift that can convert early-stage pilots into commercial demand. Industry bodies are lobbying the finance ministry for clear mandates, predictable incentives and lower taxes so that green hydrogen becomes viable not only for big industrial groups but also for MSME suppliers across steel, fertiliser and refinery value chains.

The Confederation of Indian Industry (CII) has emerged as the most vocal proponent of demand-side signals, urging the Centre to pair green hydrogen use obligations with targeted fiscal support in the upcoming Budget. In its pre-Budget submission, CII has called for phased mandates in hard-to-abate sectors, backed by subsidies and credit support, arguing that policy clarity can unlock long-term offtake contracts and accelerate investment in domestic electrolyser capacity.

Budget 2026: From supply push to green hydrogen demand creation

Over the last two years, policy has focused on building supply through the National Green Hydrogen Mission and the SIGHT programme, which together carry an outlay of nearly ₹19,744 crore for production and electrolyser incentives up to 2029–30. SECI has already awarded more than 8.5 lakh tonnes per annum of green hydrogen and over 2.3 GW of electrolyser capacity under these schemes. Industry now wants the Budget to match this supply push with stronger demand creation levers.

Industry executives point out that without clear offtake, tendered capacity may struggle to reach financial closure, especially as green hydrogen still costs significantly more than fossil-based hydrogen in India. Estimates from recent market studies place current costs between $3.8 and $5.8 per kg, with projections of steep declines only by 2030 as renewable tariffs fall and capex drops. Bridging this interim viability gap through Budget-linked instruments is now seen as critical to keeping project pipelines on track.

Mandates, VGF and PLI-style incentives under discussion

Policy advisers tracking the consultations say one strand of industry feedback favours viability gap funding, structured on lines similar to infrastructure support schemes. Under this model, the Centre could compensate part of the cost differential between grey and green hydrogen for early adopters in sectors like refineries, fertilisers and steel. Another option on the table is extending production-linked incentive style payments per kilogram of green hydrogen consumed domestically, building on the existing SIGHT Component II framework for producers.

CII’s submission stresses that any consumption mandate should be phased and paired with time-bound incentives, rather than imposed abruptly. According to people familiar with the proposal, the chamber has argued that “mandates without mitigation of initial cost premiums risk slowing investment instead of catalysing it,” and has asked for multi-year visibility on any subsidy glide path. Officials are also evaluating whether GST tweaks, including a cut from the present 18 per cent to 5 per cent on green hydrogen, could be timed with such obligations.

Steel, refineries and fertilisers seen as early Budget winners

Among sectors, steel is emerging as a clear candidate for focused support. Assocham has sought incentives for hydrogen-based direct reduced iron, concessional green finance and support for waste-heat recovery and renewable captive power to cut the industry’s carbon footprint. The chamber has framed decarbonisation as both a competitiveness issue and an export market requirement, especially as trading partners move towards carbon border measures.

Refineries and fertiliser units, already large consumers of conventional hydrogen, are expected to feature prominently in any initial use obligations or Budget-linked pilots. Government tenders under the SIGHT programme have earmarked significant volumes specifically for refinery use, while mission documents highlight fertilisers as a priority for import substitution of natural gas-based ammonia. Any Budget signals on offtake guarantees, cheaper green credit lines or accelerated depreciation could therefore ripple across entire value chains, including MSME equipment and service providers.

Parameter	Current status	2030 target / outlook
National Green Hydrogen Mission outlay	₹19,744 crore	Support through FY2030
SIGHT incentives (production + electrolysers)	About ₹17,000 crore	Disbursed over 2023–2030
Electrolyser manufacturing capacity	2.3 GW awarded	20 GW target
Green hydrogen production	Multiple tenders awarded	5 MTPA target

What Budget tweaks could mean for investors and MSMEs

Market analysts say that even modest Budget moves—such as clearer tax treatment, an explicit viability gap window or a dedicated green hydrogen credit line—could materially improve project economics and crowd in private capital. A recent report estimated potential investments of up to ₹10 lakh crore in India’s green hydrogen value chain by 2030, contingent on policy stability and bankable demand.

For MSMEs that supply components, engineering services or operate captive plants, policy clarity on standards, GST rates and eligibility for central schemes could help de-risk participation. With the Budget expected to refine India’s clean energy playbook rather than launch entirely new schemes, stakeholders will be watching closely for how deeply green hydrogen is woven into existing PLI, VGF and green finance frameworks, and whether those choices finally tilt the economics in favour of large-scale industrial use.