The Indian government could soon announce an incentive program worth over $2 billion to help reduce the production cost of green hydrogen, according to reports.

It is understood that the incentive package – worth some $2.2 billion – could be part of next year’s budget scheduled to be tabled in the Sansad (India’s parliament) on 1 February.

The package is expected to enable manufacturers of electrolyzers to reduce the cost of green hydrogen production. 

It is understood that the current cost of production of green hydrogen is around Rs 300-400 ($3.60-4.80) per kilogram. The Indian government aims to reduce that by a fifth over the next five years. The global aspirational goal is to reduce this cost to less than $1 per kilogram by 2030.

Oil refineries and fertilizer manufacturers are the leading consumers of hydrogen in India, representing an annual demand of 5 million tonnes. Currently, this hydrogen is produced either as a by-product in the petroleum refining process or from natural gas. Both these processes generate greenhouse gas emissions. India lacks any significant reserves of natural gas, making it highly dependent on costly imports.

Over the last few months, the Indian government has been looking to push green hydrogen as an alternative to hydrogen produced from conventional process. It announced plans to introduce mandates for large industrial consumers to procure green hydrogen. The green hydrogen procurement obligation will likely cover oil refineries, fertilizer manufacturers, and steel producers. Such an obligation will take care of demand. However, cheap supply of green hydrogen remains a key challenge.

A number of Indian and international companies have announced plans to establish electrolyzer manufacturing facilities. 

Furthermore, renewable project developers including ReNew Power and Acme have announced technology partnerships. Energy companies like Reliance have also made acquisitions to improve access to electrolyzer technology and plan to set up gigafactories.