How can India Lead Green Hydrogen Production with Financial Support?

REPORT

Augmenting the National Green Hydrogen Mission

Assessing the Potential Financial Support through Policies in India

01 May, 2025 | Industrial Sustainability

Ribhav Pal, Vishal Tripathi, Karan Kothadiya, Prateek Aggarwal, Deepak Yadav

Suggested Citation: Pal, Ribhav, Vishal Tripathi, Karan Kothadiya, Prateek Aggarwal and Deepak Yadav. 2025. Augmenting the National Green Hydrogen Mission: Assessing the Potential Financial Support through Policies in India. New Delhi: Council on Energy, Environment and Water (CEEW).

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Overview

This report presents an assessment of potential financial support available from both state and central governments for the green hydrogen sector in India, complementary to the provisions in the National Green Hydrogen Mission (NGHM). The analysis covers both power-related and non-power-related support mechanisms across 12 states, utilising official policy documents at various stages of implementation. The study categorises the potential support into three distinct forms: components with budgetary implications, components involving revenue forgone by the state, and components with socialised costs. This report aims to inform industry and financial stakeholders in India’s green hydrogen ecosystem about the nature and scale of potentially accessible support.

Key highlights

The total potential financial support through state-level green hydrogen policies is estimated to be around INR 5.05 lakh crore (approximately USD 61 billion) over the duration of these policies.
Power-related components account for 62 per cent (INR 3.13 lakh crore or USD 38 billion) of the total potential support, including electricity duty waiver, inter- and intra-state transmission charge waiver, wheeling charge waiver, and power tariff rebate.
The three main non-power-related components - capital subsidy, interest subvention, and SGST reimbursement - account for 37 per cent (INR 1.87 lakh crore or USD 23 billion) of the total potential support.
Seven states—Odisha, Maharashtra, Tamil Nadu, Uttar Pradesh, Rajasthan, Gujarat, and Andhra Pradesh—account for 92 per cent of the potential support cumulatively and also account for 92 per cent of the total green hydrogen production capacity projected through 2030.
The total estimated baseline green hydrogen production is projected to be 8.33 MTPA by 2030.
Components requiring budgetary outlay, such as capital subsidy, power tariff rebate, and interest subvention, account for 66 per cent of the total support, while foregone revenues like electricity duty waiver and SGST reimbursement account for about 19 per cent.
The estimated total potential support does not include additional surcharge (AS) and cross-subsidy surcharge (CSS) waivers, which could potentially increase power-related support by 4.9 times, adding around INR 15.2 lakh crore (USD 190 billion) to the total potential support.

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Ribhav Pal

Consultant

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"India has set amongst the world’s highest green hydrogen targets, backed by central and state-level policies offering financial incentives. The CEEW study aims to inform industrial and financial sector stakeholders about the extent of governmental support available for green hydrogen projects. By quantifying monetary incentives—including budgetary provisions and exemptions—it enhances India’s investment appeal. Faster, standardised clearances through Centre–State coordination will be key towards supporting the National Green Hydrogen Mission’s vision of positioning the country to lead in green hydrogen production and exports."

Executive summary

Green hydrogen is a clean energy carrier that can help decarbonise several hard-to-abate sectors of the Indian economy, enhance India’s energy self-reliance (Aatma-nirbhar Bharat), and reduce its expenditure on imported fossil fuels. As the global green hydrogen sector is still in its early stages, India has the opportunity to deploy green technologies at scale and secure a significant share of the global supply of green energy solutions. To realise its goals of energy independence and decarbonisation, numerous policies have been announced at the central and state level in India to address challenges and offer incentives for large-scale green hydrogen production.

The National Green Hydrogen Mission (NGHM), launched by the Ministry of New and Renewable Energy (MNRE) in January 2023, is a key policy initiative with a budget of INR 19,744 crore (approximately USD 2.5 billion). It offers holistic support to the sector through various mission components designed to generate demand, incentivise supply, and strengthen critical enablers of the green hydrogen ecosystem (MNRE 2023). Additionally, the Green Hydrogen Policy (GHP) by the Ministry of Power offers a waiver on inter-state transmission system (ISTS) charges and provides guidelines for sourcing renewable energy (RE) for green hydrogen projects, among other provisions (Ministry of Power 2022).

Complementing these national policies, the states of Rajasthan, Maharashtra, Uttar Pradesh, Andhra Pradesh, and West Bengal have introduced green hydrogen policies, while Punjab and Haryana’s policies are currently in the draft stage. Five states – Gujarat, Tamil Nadu, Odisha, Kerala, and Madhya Pradesh – support green hydrogen through their industrial or power sector–related policies. Some state-level policies offer financial incentives and exemptions for both power- and non-power-related aspects, while others offer only one of the two. It is essential to consider the increased financial support for green hydrogen in India through various state- and central-level policies, alongside the NGHM.

Research objectives

This report aims to quantify the power- and non-power-related financial support provided by the state and central governments for developing India’s green hydrogen economy. To this end, we covered the following aspects:

Map hydrogen production targets and export announcements across states,
Estimate potential green hydrogen consumption across states.
Identify and quantify the potential support for green hydrogen within state and central level policies.

We expect the study’s findings to inform industrial and financial sector stakeholders on the governmental support available for green hydrogen projects. Additionally, it will enhance India’s attractiveness as a market for investments, advancing the NGHM goal of establishing India as a hub for green hydrogen.

Methodology and interpretations

We use official policy documents – either notified or in draft form – for each of the 12 states to quantify the potential financial support for green hydrogen. To determine the amount of support, the following factors were considered:

Policy components considered: Under power-related support components, we include waivers of inter (ISTS)- and intra-state transmission system (InSTS) charges, electricity duty (ED), wheeling charge, and power tariff rebates. Our analysis’s three main non-power-related components are capital subsidies, interest subvention, and State Goods and Service Tax (SGST) reimbursement. While the analysis also considers other components such as blending subsidies, consumption subsidies, vehicle subsidies, support for refuelling stations, land procurement, and research and development (R&D) expenditure, these account for a smaller share compared to overall potential support.
Baseline green hydrogen production: We consider a baseline green hydrogen production for each state by 2030 and scale the financial support under each component of the respective policies. If a state policy specifies green hydrogen production targets, we consider those targets as the state’s baseline. If no targets are mentioned in the state-level policy, we estimate the baseline using a bottom-up approach based on the overall domestic demand from the Phase 1 focus sectors in the NGHM. The bottom up estimation of demand includes:
- An assumption that the Phase 1 of the NGHM will focus on hydrogen consumption in refineries and non-urea fertiliser production.
- In Phase 1, refineries are projected to consume 1 million tonnes per annum (MTPA) of green hydrogen, while non-urea fertiliser plants are expected to use 0.5 MTPA by 2030.
- Additionally, the announced export-oriented projects to the tune of 3.5 MTPA are considered to meet the NGHM production target.
- Based on current hydrogen production levels, we allocate domestic demand for the two sectors (refineries and non-urea fertilisers) across states. Table ES 1 shows the state-wise baseline green hydrogen production considered in the analysis.

Table ES1 The total estimated baseline green hydrogen production is 8.33 MTPA by 2030

Our assessment of total green hydrogen production of 8.33 MTPA, exceeds the NGHM target of 5 MTPA. We have used 8.33 MTPA to reflect the potential outlay across all states. The actual realisation of this demand will depend largely on the market dynamics, especially for exports. However, it should be noted that the total production of 8.33 MTPA considered in the analysis is lower than a potential green hydrogen production of 10 MTPA, including exports, which is envisaged in the NGHM.

Uniform and optimised operational parameters across states: We consider an optimised proportion of 77 per cent wind energy and 23 per cent solar energy being supplied to all green hydrogen projects in the country. Additionally, we assumed that each state’s renewable energy (RE; wind and solar) for green hydrogen production will be sourced from within the state, except for six states – Punjab, Haryana, Odisha, Kerala, West Bengal, and Uttar Pradesh – which are classified as non-windy and would import wind energy from neighbouring states. We also assume that the most cost-effective method for RE procurement is through captive open access in all states except Odisha and West Bengal, where the state-level incentives make distribution company (discom)-based procurement cost economical.
Guiding principles for aggregation: To ensure consistency in support aggregation, we rely on the following guiding principles:
- States as independent entities: We treat each state as a separate entity, meaning that all investments required for meeting each state’s green hydrogen production potential are considered to be made within that state, except in non-windy states.
- Considered maximum support for each component: We estimate the highest potential support for each component, unless policy documents specify upper limits. For instance, we consider the maximum limit of INR 60 lakh available for the first 500 vehicles under the vehicle subsidies outlined in Maharashtra Green Hydrogen Policy in quantifying this support component (Government of Maharashtra 2023).
- State and central policies read in consonance: All state-level support components, especially those related to power, are expected to be consistent with the benefits provided by central government policies and regulations. For example, benefits from central policies (such as the GHP, which covers exemption for levy of inter-state transmission charges (ISTS) for the project’s lifespan) and the Uttar Pradesh Green Hydrogen Policy (which includes waivers for wheeling charges, intra state transmission charges (InSTS) charges, and electricity duty) are combined to quantify the potential support in Uttar Pradesh.
- Aggregate quantification, not annualised: The total exemptions under each state’s policies are calculated on an aggregate basis over the entire duration as specified by the policies or the equipment’s lifetime, rather than on an annualised basis. For example, we quantify and present the total 60 per cent InSTS waiver for non-anchor units under the Maharashtra Green Hydrogen Policy, over the specified duration of 10 years (Government of Maharashtra 2023).

Key findings

This section quantifies potential support for each component across states. The key findings are listed below:

Aggregate financial support

We estimate the total potential support to be around INR 5.05 lakh crore (around USD 61 billion) over the duration of these policies. This support may or may not be fully realised, depending on market dynamics and the green hydrogen production achieved by the target year for each state-level policy.
We estimate that power-related components account for INR 3.13 lakh crore (USD 38 billion), which is 62 per cent of the total, as shown in Figure ES 1. These components include waivers on ED, inter- and InSTS charges, wheeling charge, and power tariff rebates.
Capital subsidies, interest subvention, and SGST reimbursement are the three main non-power-related components, totalling INR 1.87 lakh crore (approximately USD 23 billion), which represents 37 per cent of the total potential support.

Figure ES1: Power-related components make up 62 per cent of the total potential support of INR 3.13 lakh crore (USD 60 billion)

Source: Authors’ analysis
Note: (1) Intra-state transmission charge waiver, INR 16,164 crore
(2) SGST Reimbursement, INR 7,469 crore
(3) Other non-power components INR 4,791 crore

State-wise assessment of incentives

Seven states – Odisha, Maharashtra, Tamil Nadu, Uttar Pradesh, Rajasthan, Gujarat, and Andhra Pradesh – together represent 92 per cent of the potential support, as shown in Figure ES 2. As indicated in Table ES1, these states also account for 92 per cent of the total green hydrogen production capacity projected through 2030.

Power-related components account for 92 per cent of the total potential support in Odisha, Uttar Pradesh, Maharashtra, and Andhra Pradesh combined.
Gujarat and Tamil Nadu do not have dedicated green hydrogen policies. Instead, they address it through their industrial policies, offering only non-power-related support for green hydrogen.
Rajasthan is the only state with a green hydrogen policy that provides more support for non-power-related initiatives than for power-related ones.

The remaining five states – Punjab, Haryana, West Bengal, Madhya Pradesh, and Kerala – have fewer support components and contribute only 8 per cent of the baseline green hydrogen production. Consequently, they account for just 8 per cent of the total potential support.

Fiscal implications for state and national governments

Components with a direct budgetary outlay from state governments—such as capital subsidies, power tariff rebates, and interest subvention account for 66 per cent of the total potential support.
Foregone revenue items, including ED waivers, SGST reimbursements, and land-related support, make up 19 per cent.
The waiver of ISTS charges, a nationally socialised cost with no direct fiscal impact on state budgets, accounts for the remaining 15 per cent.

Figure ES 2: Seven states—Odisha, Maharashtra, Tamil Nadu, Uttar Pradesh, Rajasthan, Andhra Pradesh and Gujarat—account for 92 per cent of the potential support cumulatively

Source: Authors’ analysis

Study limitations

The high-level assumptions used in the analysis significantly affect the study’s findings. This section outlines the limitations of our study.

Realisable support out of potentially available support: We limit our analysis to quantifying the total potential support per the state and central government policies. We do not project or quantify the proportion that can actually be realised out of this total potential. Such a quantification can only be done if green hydrogen becomes cheaper than grey hydrogen or hydrogen purchase obligations (HPO) are enforced on end-consumers and there is a guaranteed offtake contracts for exports markets.
Changes in capital costs and efficiencies: We do not account for changes in the capital costs or efficiencies of electrolysers, solar panels, and wind modules over time. As a result, the actual budgetary outlay/support may differ from the amounts indicated in the study.
National-level optimisation of RE assets: We do not exactly optimise for the cost of hydrogen based on the open access charges across various states. The relative distribution of wind and solar power for green hydrogen production will depend on the location-specific profiles which was outside our scope.
Variability in RE deployment: We do not account for differences in RE deployment between states, which can arise from factors such as favourable state policies, cost economics, right of way, and ease of implementation.
Constant charges and their impact on estimated benefits: The study assumes that incentives and charges remain constant during the applicable period. However, as solar and wind power costs decrease due to learning rates, open-access charges could also change in the future. The study does not consider this potential change due to market uncertainties in power pricing and the timeline for green hydrogen offtake.
Variation in ISTS charges: We do not account for differences in contracted ISTS quantum across states, which could potentially change the ISTS charge.

Conclusion

The INR 19,744 crore (around USD 2.5 billion) outlay in the NGHM is augmented 26 times by the total potential financial support in state-level green hydrogen policies, estimated to be around INR 5.04 lakh crore (around USD 61 billion). The power–related components form 62 per cent of the total support, while the remaining 38 per cent is directed towards non-power related components.

This financial support will strengthen India’s ambitious goal of becoming a global leader in green hydrogen production and export. Complementing the NGHM and the GHP, the state-level policies offer a broad range of incentives and exemptions, addressing key aspects critical to the industry. This potential support is not limited to a few states; 7 out of the 12 states that offer support contribute 92 per cent of the total support. Fully realising this potential support could be crucial not only for achieving and surpassing India’s green hydrogen targets but also for advancing its decarbonisation, self-reliance, and green industrialisation efforts.