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India's Green Steel Drive: Public Finance as the Catalyst

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  Published in Business and Finance on Thursday, November 27th 2025 at 2:04 GMT by Business Today

Strategic Deployment of Public Finance Needed to Scale Green Steel in India
Business Today – 27 Nov 2025

India’s steel industry, one of the world’s largest carbon emitters, is under increasing pressure to transition to low‑carbon or “green” production. The Business Today article, “Strategic deployment of public finance needed to scale green steel in India,” argues that the only viable path to a significant green‑steel output is a coordinated, multi‑tiered public finance strategy. The piece synthesises government policy, industry perspectives, and international experience to outline how India can mobilise the capital, risk‑sharing mechanisms and policy incentives required for a green steel revolution.

1. The Context: Green Steel and India’s Climate Commitments

India has pledged to cut its CO₂ intensity by 45 % by 2030 (from 2015 levels) and reach net‑zero by 2070, in line with the Paris Agreement. However, the country’s steel sector accounts for roughly 40 % of national CO₂ emissions, making it a critical area for decarbonisation. Green steel can be produced via two primary routes:

1. Hydrogen‑based direct reduction – using hydrogen instead of coal to reduce iron ore.
2. Electric Arc Furnace (EAF) recycling – melting scrap steel with electricity powered by renewables.

While EAF recycling is already common in niche markets, scaling hydrogen‑based production requires new infrastructure, high upfront investment, and a robust supply chain for green hydrogen.

2. Why Public Finance is Central

The article emphasises that private capital alone cannot fund the transition because of the high upfront cost, uncertain returns, and significant policy risk. Public finance can bridge this gap by:

• Providing risk‑sharing instruments (e.g., concessional loans, guarantees) that lower the effective cost of capital.
• Offering direct subsidies or tax incentives to offset early operating losses.
• Funding research, development, and pilot projects that de‑risk new technologies for private investors.

The piece cites a 2023 World Bank report on “Financing Low‑Carbon Energy Transitions” (linked in the article) that found that in many emerging economies, state‑backed financing reduces the cost of capital for green projects by 10–15 %.

3. Existing Government Initiatives and Gaps

India’s Ministry of Steel has launched a few initiatives aimed at green steel:

• Steel Green Fund (SGF) – a ₹5,000 crore fund earmarked for pilot hydrogen plants.
• Tax incentives for steel plants adopting renewable electricity.
• Carbon pricing in select zones, encouraging emission reductions.

However, the Business Today piece points out that these measures are fragmented, lack a coherent long‑term roadmap, and are insufficient to meet the scale required. The article also references a link to the Ministry’s “National Green Steel Roadmap” (draft), which is still in early stages of drafting.

4. A Multi‑Layered Public Finance Framework

The article proposes a tiered finance architecture:

The article stresses that a balanced mix of debt, equity, and hybrid instruments is essential to keep costs low while preserving fiscal sustainability.

5. Lessons from Global Experience

Several countries are cited as exemplars:

• Germany’s “Steel Transition Strategy” – the German government’s 2030 plan uses a combination of a state‑backed loan guarantee scheme and direct grants to incentivise the installation of hydrogen‑based reduction cells.
• South Korea’s “Green Steel Fund” – a public‑private partnership that mobilised ₩5 trillion in funding for green steel projects.
• Canada’s “Infrastructure and Investment Canada” – a policy that earmarked federal funding for green hydrogen projects across the country.

Business Today links to a Bloomberg article on “Germany’s Hydrogen Steel Drive” for readers seeking deeper comparative analysis.

6. Risk Mitigation and Governance

Transitioning to green steel is fraught with technical, market, and regulatory risks. The article recommends a robust governance framework:

• Dedicated Green Steel Authority – to coordinate policy, approve projects, and oversee funding distribution.
• Public‑Private Partnership (PPP) Models – to combine the strengths of state regulation and private sector efficiency.
• Performance‑Based Incentives – tying subsidies and tax breaks to verified emission reductions rather than production volumes.

A key point raised is the need for a transparent monitoring and reporting system. The Business Today piece links to the “Carbon Reporting Framework for Indian Industries” (draft) which would standardise how steel plants measure and disclose emissions.

7. Economic and Socio‑Environmental Impact

Scaling green steel would have multiple co‑benefits:

• Job Creation – new roles in hydrogen production, renewable energy, and steel plant retrofitting.
• Technology Transfer – strengthening India’s position in emerging green technologies.
• Export Potential – green steel could open up new markets in Europe and the US, where sustainability criteria are tightening.

The article provides a short case study of a green steel pilot plant in Jabalpur that has already created 200 jobs and reduced emissions by 30 %. A link to the Ministry of Steel’s “Industrial Impact Assessment” report is included.

8. The Way Forward: Policy Recommendations

In its conclusion, Business Today distills the discussion into five actionable policy recommendations:

1. Formalise a National Green Steel Roadmap – with clear milestones and a financing schedule.
2. Establish a Public‑Private Green Steel Authority – to orchestrate PPP projects and guarantee mechanisms.
3. Deploy a Tiered Funding Mechanism – combining green bonds, guarantees, and direct subsidies.
4. Align Incentives with Emission Reductions – rather than merely production targets.
5. Create a Knowledge Hub – linking research institutions (e.g., IITs) with industry to accelerate technology diffusion.

The piece also urges the government to explore international collaboration, such as funding from the Green Climate Fund (GCF) and joint ventures with Japan’s JFE Holdings, which has been actively investing in green steel technology.

9. Bottom Line

“Strategic deployment of public finance needed to scale green steel in India” argues that India’s ambition to become a global leader in low‑carbon steel can only be realised if the public sector takes a leading role in financing. By adopting a coordinated, multi‑layered approach—leveraging capital markets, guarantees, dedicated funds, and supportive policy instruments—the country can lower the barriers to entry for green steel technologies, secure long‑term supply chains, and deliver tangible economic and environmental benefits.

For readers seeking deeper insights, the article provides direct links to government policy documents, international case studies, and research reports. These resources together paint a comprehensive picture of the current landscape and the strategic path forward for India’s green steel journey.