Mandated Market Mechanisms Mitigate Market Maladies

Ashwini Kumar highlighted that the government sees public procurement as vital for creating an initial market for green steel, offsetting cost disadvantages against cheaper, high-emission alternatives. “Green steel will be in the market & competing against not so green steel. There is need to mandate some kind of public procurement of green steel,” Kumar explained. The plan includes possible targets, such as a 25% share for green steel in public projects, encouraging producers to scale up low-emission technologies & helping buyers manage higher costs.

Carbon Conundrum Complicates Continental Commerce

At the same time, Indian officials criticised the European Union’s Carbon Border Adjustment Mechanism as an unfair trade barrier. The mechanism seeks to impose levies on imports based on carbon content, complicating India-EU free trade negotiations. Kumar noted the paradox: “On the one hand, they talk of cooperation, on the other hand, they use CBAM as a barrier.” India argues that such measures penalise developing countries rather than supporting joint climate action.

Fiscal Framework Fosters Fossil-Free Foundries

The government’s policy roadmap includes incentives like tax benefits, production-linked incentives & targeted research funding to promote green steel. These aim to lower production costs over time, narrowing the gap between green & traditional steel. Kumar hinted at more measures under discussion to help smaller mills adopt technologies like hydrogen-based reduction & carbon capture, reflecting a broader ambition to reshape India’s steel landscape.

Procurement Push Propels Producers’ Pivot

Public procurement is seen as a sine qua non for driving initial demand. State-run infrastructure projects, railways & defence orders could be required to source a share of green steel, stimulating capacity growth. Kumar observed, “We are working on that also. It’s a tricky business.” By anchoring demand in the public sector, the government aims to trigger larger private adoption, spreading cost recovery & investment benefits across the value chain.

Sustainability Strategy Spurs Sectoral Synergy

Beyond procurement, the Ministry of Steel plans to coordinate with other ministries to align green steel targets with national climate goals. This includes collaboration with energy, transport & housing ministries to set shared targets & timelines. Such alignment can ensure a steady demand pipeline, allowing steelmakers to plan capacity investments with greater confidence, while advancing India’s broader decarbonisation commitments under the Paris Agreement.

Technological Transition Tackles Traditional Techniques

Transitioning to green steel production requires significant technology shifts, such as moving from coal-based blast furnaces to electric arc furnaces & hydrogen direct reduction. Kumar acknowledged the challenge, citing high capital costs & uncertain returns, but stressed that “mandated demand can lower risk.” Government-backed R&D programmes & international cooperation aim to fast-track deployment of these cleaner technologies.

Trade Turbulence Tests Transformative Targets

The CBAM dispute adds external complexity to domestic reforms. India’s steel ministry argues that penalising carbon intensity of exports undermines investments in green capacity at home. Kumar warned that such trade barriers could “distort competitiveness” & slow down the pace of India’s green steel transition. The government plans to raise these concerns in ongoing free trade discussions, seeking exemptions or transitional arrangements to protect Indian producers.

Key Takeaways

• India may mandate 25% public procurement of green steel to boost demand.

• EU’s Carbon Border Adjustment Mechanism seen as a trade barrier by India.

• Policy mix of incentives & demand targets aims to scale up green steel production.