Incentives for green hydrogen likely in Union Budget

New Delhi: The government may provide for targeted fiscal incentives and allocation of funds for the promotion of green hydrogen in the country in Union Budget 2022-23, which is slated to be unveiled in Parliament on Tuesday.

The government launched National Hydrogen Mission in 2021. Earlier this month, Power and New & Renewable Energy Minister R K Singh had indicated that a green hydrogen policy will be unveiled in February which would feature many incentives to boost green hydrogen in the country.

”While 2021 saw the launch of National Hydrogen Mission, it is likely that the Budget may provide for targeted fiscal incentives for R&D in green hydrogen segment, creation of domestic supply chain for hydrogen and reduce customs duties on electrolyzers to boost green hydrogen production,” says Venkatesh Raman Prasad, Partner, J Sagar Associates (JSA).

Prasad is of the view that India’s commitment at COP 26 of achieving net-zero emissions by 2070 and meeting 50 percent of energy requirements from renewable energy by 2030 shows that the government intends to focus on cleaner sources of energy.

Hemant Mallya, Senior Programme Lead, Council on Energy, Environment and Water (CEEW) opines that green hydrogen has many industrial uses and can potentially decarbonize many hard-to-abate sectors, like iron and steel industry.

He says that an outlay of Rs 1,200 crore by 2024 in the upcoming Budget could trigger pilots in various end-use applications such as testing green hydrogen readiness of natural gas pipelines, underground hydrogen storage, and pilots for equipment such as furnaces, boilers, and process heaters.

He suggests that another Rs 165 crore could support R&D, especially on catalysts and electrolyzer membranes, finding substitutes for critical minerals, setting up testing labs, and enforcing safety standards.

These investments would help indigenize green hydrogen production and use it as an industrial fuel, he opines.

Davinder Sandhu, Co-founder & Chairman, of Primus Partners says that electrolyzers used to manufacture hydrogen at present are expensive, and bringing down their cost will contribute to reducing the cost of green hydrogen.

This will enable the country to meet the target of establishing 10 gigawatts of domestic manufacturing capacity as well as making India a global leader in the sector, he opines.

In this regard, he suggests that the government should consider a production-linked incentive (PLI) scheme which can support the indigenization of electrolyzers and scale up green hydrogen production at optimized cost.

Earlier this month, Union minister R K Singh had said a new green hydrogen policy will feature incentives like free power transmission for 25 years, dollar-denominated bids, the offer of land in renewable energy parks, and land allocation near ports for creating bunkers for green hydrogen or ammonia.