Transitioning to green steel – The Hindu

India’s path to net-zero emissions by 2070 will depend heavily on how quickly it scales production and consumption of green steel, as steel remains one of India’s largest industrial sources of emissions. The materials we use to build our future must strengthen our progress, not undermine it.

With this in mind, the Ministry of Steel constituted 14 task forces bringing together industry leaders and technical experts to systematically map the sector’s decarbonisation levers. Their work covered the full spectrum of transition pathways, which helped create a roadmap for accelerating low-carbon steel production.

But many members saw a barrier: the “green premium.” Producing green steel carries high upfront costs for manufacturers. Bridging this gap requires targeted fiscal support for producers in the early years. GST rationalisation and time-bound fiscal incentives can help producers manage the transition. Does this mean that using public procurement to boost demand for premium green steel is an unworkable strategy?

A manageable increment

It is important to distinguish between the producer’s additional cost and the actual burden on public procurement. Our analysis showed that even when green steel carries a premium, the effect on large infrastructure projects is minimal. Steel typically accounts for about 18% of large infrastructure projects, which form the bulk of public sector capex in India. As a result, even a 30% premium on green steel, and exclusive use of green steel by public sector infrastructure, translates into an increase of roughly 5.5 % in overall project costs. As not all public infrastructure projects will switch to green steel in the medium term, assuming a 20% rise only results in a 1.1% rise in the budgets of public works such as highways.

This is a manageable increment, especially when seen as insurance for national economic security. India faces dual pressures from the EU Carbon Border Adjustment Mechanism and volatile prices of coking coal imports, which exceed 50 million tonnes annually and expose us to price shocks that affect trade balance and industrial stability. Transitioning to green steel helps bypass carbon tariffs while insulating national projects from fossil fuel price volatility.

Global experience offers a clear template for aligning policy with market reality. Japan’s Green Purchasing framework shows that green procurement must work alongside fiscal incentives, pairing demand mandates with production support so industry can respond at scale. California’s Buy Clean model highlights how strict carbon benchmarks and verified disclosures create traceability and reduce administrative risk. Building on these lessons, India has introduced a dedicated Green Steel Taxonomy with a 3-, 4-, and 5-star rating system that ranks steel by emission intensity, providing the carbon “nutrition label” the market lacked.

Building on the taxonomy and stakeholder consultations, the Ministry undertook initial steps to institutionalise green steel public procurement mandates. However, the proposal awaits final approval from key stakeholders, including the Ministry of Finance, largely due to concerns around the green premium and verifiability.

The way forward

At the heart of this delay is a trust deficit. Today, a procurement officer has no reliable way to distinguish a certified green TMT bar from a conventional one. Addressing this challenge is possible. By leveraging the existing Made in India QR code infrastructure alongside the Quality Council of India’s accreditation system, Green Star ratings could be embedded into product verification. This would allow procurement officers to instantly confirm the carbon credentials of a product.

Other administrative hurdles can be addressed through targeted reform. For example, procurement frameworks should shift the focus from the lowest upfront price to a broader definition of value for money that recognises sustainability and national economic interest. In parallel, the Schedule of Rates, which guides public works estimates, must explicitly include certified low-carbon steel. Today, green steel may be treated as a deviation because carbon intensity is not recognised as a standard quality parameter. Codifying it would enable officers to procure sustainable materials without administrative risk. Building the capacities of the procurement official, handholding them and evangelising the need for GPP with the States are critical.

Second, our Production Linked Incentives and green hydrogen missions must be aligned with procurement tenders. If the state is subsidising the production of green steel, it must also act as the anchor customer for that output. This alignment ensures that private incentives are harmonised with the public for good.

While a 3-star benchmark provides a practical starting point for adoption, procurement policy should also clearly signal a shift towards 4- and 5-star steel over time. A roadmap that progressively tightens standards after 2030 would encourage industry to invest in higher-grade low-carbon production.

India possesses a window of opportunity: the technology exists, the green premium is manageable, and the market is ready. A practical strategy is to launch focused pilots through centralised purchasers such as the Indian Railways. The procurement scale can create a living lab for green steel. Now, the Ministries of Steel, Finance, and Environment must coordinate to link climate ambition with financial and procurement power.

Nagendra Nath Sinha, Former Secretary, Ministry of Steel; Alfahad Sorathia, Policy analyst