Green Hydrogen has emerged as one of the viable alternatives in India’s quest to become energy independent by 2047 and its transition to clean energy. As we currently import approximately 40% of our energy requirements, it is imperative to look for more reliable renewable energy sources that could bolster the efforts of India in becoming self-reliant. Green hydrogen, produced through electrolysis of water using renewable energy, provides a zero-carbon alternative to conventional “grey hydrogen” derived from fossil fuels. For India, which consumes nearly 6 million tonnes of hydrogen annually (primarily for petroleum refining and manufacturing of ammonia for fertilizers etc.), the shift to green hydrogen is central to achieving its Net Zero by 2070 pledge made at COP26.

India ratified the Paris Agreement in 2016, launched the National Hydrogen Energy Mission in the budget released in the year 2021–22, and in January 2023 unveiled the National Green Hydrogen Mission. These steps aim to scale production, reduce costs, and create enabling infrastructure. However, challenges persist including high electrolyser costs, water and land requirements, transmission access, and regulatory clarity.

The legal and policy framework is therefore critical in shaping the green hydrogen ecosystem. This article examines the central and state initiatives, ongoing projects, financing mechanisms, and the way forward with respect to use of green hydrogen in the country.

Central Government Initiatives

1. Green hydrogen Policy (2022)

The Ministry of Power notified the Green Hydrogen Policy in February 2022 as the first comprehensive framework recognizing green hydrogen as a distinct energy source to provide incentives for developers and users:

• Transmission incentives: 25-year waiver of inter-state transmission charges for projects commissioned before June 2025.
• Open Access: Green hydrogen plants will get guaranteed approval within 15 days of receipt of application for sourcing renewable energy and the open access charges shall be capped under Green Energy Open Access Rules 2022.
• Banking of power: Banking will be allowed at state commissions’ regulated rates for a period of 30 days for renewable energy used for making green hydrogen.
• Renewable Purchase Obligation compliance: Consumption of renewable power for hydrogen production counts towards both the producer’s/consuming entity and DISCOM’s renewable purchase obligation.
• DISCOM supply option: Distribution companies may supply renewable energy to the producers of green hydrogen units at procurement cost plus wheeling charges along with such margin as determined by the state commission.

2. Green Energy Open Access Rules (2022)

The Electricity (Promoting Renewable Energy through Green Energy Open Access) Rules, 2022 as amended from time to time complement the Green Hydrogen Policy by:

• Providing that applications for open access will be approvedwithin 15 days.
• Ensuring no cross-subsidy surcharge if green energy is used for hydrogen/ammonia production.
• Granting consumers green certificates on yearly basis for the consumption of renewable energy beyond the renewable purchase obligation of the consumers.

3. National Green hydrogen Mission (2023)

In the backdrop of supply chain disruptions and the geopolitical uncertainties, the National Green Hydrogen Mission provides a systemic framework for scaling the manufacturing of green hydrogen:

• Phase I (2022–26): Focus on creating demand while increasing domestic electrolyser manufacturing, and setting up of pilot projects for transitioning to green energy specifically in sectors such as steel production, heavy duty mobility and shipping;
• Phase II (2026–30): Commercialisation across sectors like steel, mobility, and shipping, as costs approach fossil-fuel parity and to expand pilot projects in other areas such as railways, aviation etc.

Some other key elements of the Hydrogen Mission include:

1. Strategic Interventions for Green Hydrogen Transition (SIGHT) programme: Financial incentives to facilitate low-cost hydrogen production and domestic manufacturing of equipments and related technologies.
2. Favourable policy framework to scale production of green hydrogen by extending the benefit of existing of schemes such as Solar Parks, SEZs to include green hydrogen, increasing coordination across all the ministries, ensuring the availability of land for establishment of large-scale green hydrogen plants.
3. Phased rollout of the mission with refining and fertilizers, later expanding to steel, mobility, and exports.
4. Significant focus on research and development related to the production of green hydrogen – particularly to ensure that production, storage, transportation etc of the green hydrogen is undertaken in the safe and efficient manner.
5. The mission aims for 5 MMT annual production capacity by 2030, positioning India as a global hub.

State Government Initiatives

Several states have notified or drafted policies on green hydrogen, offering fiscal incentives, land benefits, and exemptions from energy charges. We have highlighted four models that are under implementation in various states:

1. Uttar Pradesh: Uttar Pradesh introduced its green hydrogen policy in 2024 to promote production and consumption of green hydrogen in the state. The policy encourages carbon dioxide recovery units to utilise carbon emitted from biogas and other industries. Additionally, the policy also targets hydrogen blending in green hydrogen consumption areas, development of industrial clusters, stamp duty exemptions chargeable for land purchased or leased for projects, waiver on transmission charges/cross-subsidy surcharges, wheeling charges etc.
2. Rajasthan: Rajasthan introduced its green hydrogen policy in 2023 with the aim to achieve blending of at least 10% green hydrogen in the natural gas pipeline. Additionally, there is a huge impetus on development of Green Hydrogen Generation Park and waiver of transmission charges and distribution rebates, cross-subsidy charges and additional surcharge exemptions, priority land allotment and 100% waiver on wheeling charges.
3. Andhra Pradesh: Andhra Pradesh introduced the Green Hydrogen/Green Ammonia policy in 2023 with the objective of promoting of production of Green Hydrogen/Green Ammonia by using Renewable Energy and Biomass. The state has also provided several incentives to scale the manufacturing including 100% SGST reimbursement for five years, exemptions on electricity duty for the power consumed for production of Green Hydrogen, reimbursement of cross-subsidy surcharge, and leveraging port infrastructure for exports.

Other states like Odisha, Maharashtra, and Punjab have aligned renewable energy policies with green hydrogen production. Collectively, these policies reflect competitive federalism, with states vying to attract investments in hydrogen clusters.

Financing of Green hydrogen Projects

The transition will require significant funds, specifically to achieve targets set by the Government of India, spanning across electrolysers, renewable energy capacity, storage, and transport infrastructure. Financing tools include:

1. Green Bonds: Issuance of green bonds to raise funds to support expenditures and projects with benefits to the environment. First tranche of sovereign green bonds was issued in 2023 for a total amount of INR 80 billion with varied maturity period.
2. Initiatives by Reserve Bank of India: Classification of renewable energy projects under priority sector lending directions issued by the Reserve Bank of India.
3. Multilateral Support: The World Bank approved USD 1.5 billion in 2023 for India’s low-carbon energy transition.
4. Domestic Institutions: IREDA’s tie-up with Indian Overseas Bank for co-lending for setting up of a renewable energy projects. Another Memorandum of Understanding has been executed between REC and NIIF for funding of renewable energy-based projects.

These frameworks combine concessional finance, private investment, and risk-sharing mechanisms to make green hydrogen bankable.

Way Forward

India’s hydrogen framework reflects both ambition and pragmatism:

1. Convergence of policies: Central schemes such as National Green hydrogen Mission, SIGHT now dovetail with state policies.
2. Reduction of costs for manufacturing: Domestic electrolyser manufacturing and renewable energy scaling are critical to reduce the cost of manufacturing and reduce dependence on imports.
3. Infrastructure buildup: Pipelines, storage, refuelling stations, and ports need accelerated investment, both domestic and international sources.
4. Global collaboration: Partnerships with the EU, Japan, and Middle Eastern countries can facilitate technology transfer and export opportunities for India.
5. Codification of laws: A dedicated statute regulating and codifying laws/policies/rules in relation to production, storage, transportation of green hydrogen (similar to renewable electricity laws) may be required to consolidate incentives, environmental clearances, and safety standards across the country.

India is positioning itself not only as a consumer but also as an exporter of green hydrogen and ammonia, leveraging its potential and cost advantages in the renewable energy sector.

Conclusion

The legal and regulatory framework for green hydrogen in India is evolving rapidly. From the Green hydrogen Policy, 2022 and Green Energy Open Access Rules, 2022 to the National Green hydrogen Mission, 2023, the Government has created an enabling ecosystem. States are actively competing through targeted policies, while public and private players are piloting projects across the value chain.

Financing mechanisms, including green bonds, multilateral loans, and concessional funding, are beginning to mobilise the large-scale capital required for setting up of such projects. However, challenges remain in cost reduction, regulatory clarity, and infrastructure readiness. With effective implementation, India can emerge as a global leader in green hydrogen, balancing its climate commitments with industrial growth and energy security.