Context:

• India’s path to achieving net-zero emissions by 2070 will significantly depend on scaling up the production and consumption of green steel, given that the steel sector is one of the country’s largest industrial sources of emissions.
• Recognising this, the Ministry of Steel formed 14 task forces comprising industry leaders and technical experts to chart decarbonisation pathways and develop a roadmap for accelerating low-carbon steel production.
• However, a major challenge identified was the “green premium” — the higher upfront cost of producing green steel.
• Manufacturers face financial constraints in transitioning to cleaner technologies.
• To address this, the roadmap emphasises the need for targeted fiscal support in the initial years, including GST rationalisation and time-bound incentives, to ease the burden on producers and facilitate the shift toward sustainable steel production.
• This article highlights how transitioning to green steel is central to India’s net-zero 2070 ambition, examines the challenge of the “green premium,” and explores how procurement reform, fiscal support, and verification mechanisms can accelerate low-carbon steel adoption.

Green Steel Premium: A Manageable Cost for Strategic Gains

• Limited Impact on Public Infrastructure Costs
  • Although green steel carries a premium, its overall impact on infrastructure budgets is modest.
  • Steel makes up about 18% of large public projects. Even with a 30% premium and exclusive public-sector use, overall project costs would rise by roughly 5.5%.
  • If only 20% adoption occurs, the increase in public works budgets such as highways would be around 1.1%.
• Strategic and Economic Rationale
  • The incremental cost is viewed as manageable, particularly as a safeguard for national economic security.
  • India faces pressure from the EU’s Carbon Border Adjustment Mechanism and heavy reliance on imported coking coal, exposing the economy to price volatility.
  • Green steel can help avoid carbon tariffs and reduce vulnerability to fossil fuel shocks.
• Lessons from Global Models
  • International examples offer guidance. Japan’s Green Purchasing framework combines procurement mandates with fiscal incentives to support industry transition.
  • California’s Buy Clean model uses strict carbon benchmarks and verified disclosures to ensure traceability and accountability.
• India’s Green Steel Framework
  • India has introduced a Green Steel Taxonomy featuring a 3, 4, and 5 star rating system based on emission intensity, providing transparency through a carbon “nutrition label.”
  • The Ministry has initiated steps to embed green steel procurement mandates, but final approval is pending due to concerns over costs and verification mechanisms.

Bridging the Trust Gap in Green Steel Procurement

• Strengthening Verification and Transparency
  • A key barrier to green steel adoption is the lack of reliable verification.
  • Procurement officers currently cannot easily distinguish certified green steel from conventional products.
  • Integrating Green Star ratings into the existing Made in India QR code system, alongside Quality Council of India accreditation, can enable instant carbon credential verification.
• Reforming Procurement Frameworks
  • Procurement policies should move beyond the lowest-cost principle and adopt a broader “value for money” approach that factors in sustainability and national economic interests.
  • The Schedule of Rates must formally recognise certified low-carbon steel as a standard quality parameter, reducing administrative risk for officers. Capacity building and coordination with States are also essential.
• Aligning Incentives with Demand
  • Production Linked Incentives and green hydrogen missions should be aligned with public procurement.
  • If the government subsidises green steel production, it must also act as an anchor buyer to ensure market stability and harmonise private and public incentives.
• Phased Standards and Pilot Implementation
  • While a 3-star benchmark offers an entry point, policy should gradually shift toward 4 and 5 star standards post-2030 to encourage deeper decarbonisation.
  • Launching pilot projects through large public buyers like Indian Railways can create a practical testing ground.
  • Coordinated action among the Ministries of Steel, Finance, and Environment will be crucial to link climate goals with procurement and fiscal policy.