Government to greenlight incentives to drive green steel output

The government is readying a national mission to incentivise production of sustainable steel in the country as part of its efforts to decarbonise the sector, officials said.

The size of the scheme under the mission is likely to be around ₹5,000 crore to support both primary and secondary producers, said a senior government official, adding that support measures could be a combination of concessional loans, risk guarantees and other financial instruments.

"The scheme will be tailored for secondary steel producers, but primary producers will also be able to tap into it," the official told ET on condition of anonymity.


The scheme is being firmed up and could be launched after necessary approvals from the next financial year, according to the official. A steel ministry report recently flagged the need for a comprehensive financial package to support the sector's transition towards green technology. Primary steel producers are those who use oxygen-based blast furnaces to make steel, while secondary steel producers use electric arc furnaces or induction furnaces to make steel..

India's secondary steel players command roughly half of the country's total production capacity. They are dependent on steel scrap and sponge iron as raw material.

Experts say it is imperative that decarbonisation efforts include them. "Secondary producers contribute nearly 50% to the steel production, and because of the sheer volume without decarbonising this sector, India can't achieve its net zero 2070 targets," said Amit Bhargava, partner and national head mining and metals, KPMG in India, Support measures are also needed in view of the investments required to replace technology, said experts.

According to Bhargava, secondary steel producers use electric arc furnaces and induction furnaces, which are cheaper but more polluting. "Emission reduction through improved material efficiency, use of beneficiated iron ore and alternative fuel by the secondary steel industry will be the intended outcome of this scheme," said the official.

Under the National Steel Policy, 2017, the steel ministry has projected a reduction in carbon dioxide emissions to 2.6-2.7 tonnes per tonne of crude steel through the electric arc furnace route by 2030.

According to a steel ministry report, the average adoption rate of best technologies is 50-60% among primary steel producers, while it's less than 50% among secondary steel producers.

The steel ministry is separately working on a 'Green Steel Mission' to help the steel industry reduce emissions and achieve the net-zero target. The mission includes a Production Linked Incentive scheme for green steel, incentives for the use of renewable energy and mandates for government agencies to buy green steel.