How India’s green hydrogen mission has left investors cautious

When prime minister Narendra Modi positioned India as a global hub for the production, utilisation, and export of green hydrogen under the National Green Hydrogen Mission (NGHM) 2023, he wanted to build an industry at scale. Three years on, demand is far below the capacity.Under the Strategic Interventions for Green Hydrogen Transition (SIGHT), India announced incentives worth Rs 17,490 crore: Rs 4,400 crore for electrolyser manufacturing, and Rs 13,050 crore for green hydrogen production. The main reason demand for green hydrogen has not picked up—despite the pus to build a supply ecosystem—is cost, which is way more than the price of conventional grey hydrogen. Policy support needed to create assured demand is inadequate as well. The result: Rs 17,490 crore worth of incentives under SIGHT, out of the mission’s outlay of Rs 19,744-crore, still unclaimed, and an industry waiting for a clearer market signal. Ambition vs realityNotwithstanding India’s ambition to build a green hydrogen economy, India Inc is not fully on board. Larsen and Toubro (L&T) has put on hold plans to expand the electrolyser manufacturing capacity at its Hazira plant in Gujarat from 400 MW to 1 GW.Industry sources told Business Today, on condition of anonymity, that low demand has forced big players such as Reliance Industries and Adani Group, which had announced 3-GW and 5-GW electrolyser plants, respectively, to slow expansion plans. According to Nishaanth Balashanmugam, CEO and Director of the industry body, Green Hydrogen India (GH2 India), this is a “sector-wide issue”.Reliance had announced its electrolyser plant in August 2024. It was expected to be operational by the end of 2026. A company spokesperson says on condition of anonymity the plant is “under construction” with no clarity on the production schedule. It had also announced plans to produce 3 million tonnes (MT) of green hydrogen and derivatives (green ammonia) by 2032, work on which will commence in 2028 or 2029, adds the spokesperson. The group’s electrolysers are meant for internal and external use, while green hydrogen is for captive use. “As our Chairman, Mukesh Ambani, has said, green hydrogen will become viable only when its price falls below $1 per kg,” says the spokesperson. At present, it costs $3.5-5 per kg without the SIGHT subsidy and $3-3.75 with it.The Adani Group announced plans to build the electrolyser plant in 2022 and set up a pilot project in June 2025. However, the company did not clarify its production schedule. The spokesperson for the group has not responded to Business Today’s queries.The demand constraint has been flagged for quite a while. In November 2025, the global think tank, Institute for Energy Economics and Financial Analysis, wrote that “94% of the planned capacity is yet to move beyond the announcement stage, and only 2.8% is operational.” It tracked 158 green hydrogen projects in India and found the “primary barriers” included “lack of committed buyers (unclear demand signals), high production costs, varying definitions of green hydrogen, and inadequate infrastructure—particularly for storage, transportation, and shared facilities.”In April 2026, the Chintan Research Foundation (CRF) said while the NGHM has built an impressive supply-side architecture, there are hardly any committed buyers. Low demandThe NGHM aims to generate 5 MT of green hydrogen by 2030 for use in refinery, fertiliser, city gas, steel, road transport, shipping.Although “demand creation” is the first of the mission’s three components, the measures it envisages—including specifying a minimum share of green energy and its derivatives, such as green ammonia and green methanol, in industrial use, legally enforceable consumption targets, and model guidelines for transparent, competitive procurement—are yet to be implemented.The industry is waiting for policy measures to boost demand. Balashanmugam says it is not looking for subsidies to make green hydrogen viable but wants the government to create demand by mandating its use. “Similar mandates exist in the European Union (EU) for their industries to switch to green hydrogen failing which a penalty is imposed. We are asking for an incremental rise in mandates, say 10% annual transition by users as part of the mission goal, either voluntary or compulsory. We have suggested this to the government”, he says. He adds the industry is not asking for penalties for defaults as the mandates can create better visibility and certainty for the sector.Energy experts from of the CRF warn that unless the demand crisis is addressed, the supply-side push “will end up in stranded assets, erosion in investor confidence, and failure to export (part of the mission goals) and decarbonise”. In their view, creating demand will need a mix of price support, long-term contracts, and carbon pricing, as the EU, Germany and Japan have done. They also draw attention to India’s own experience in transitioning to renewable energy and electric vehicles. In the first case, demand-side push was given precedence over supply-side push (beginning in 2010), while in the second, both were pursued simultaneously (starting in 2014). That sequencing has been reversed in the case of NGHM.For the green hydrogen transition, Debajit Palit, energy expert from CRF, suggests measures like demand-side push, with subsidies to bridge the gap between prices of grey and green energy, purchase obligations, assured take-off agreements, transition finance, and conditionally disbursed subsidies. The other measure could be transiting to hydrogen irrespective of the colour (grey, blue or green) until green hydrogen prices start falling. High costThe easiest transition is from grey hydrogen used in refineries and fertiliser plants (ammonia) to green hydrogen. India produces 6.5 MT of grey hydrogen, which is exclusively for captive use.Balashanmugam says transitioning from grey to green hydrogen will double production costs for refineries and increase them by 1–1.5 times for fertiliser plants. “The switch is economically unviable for the industry today. For non-traditional sectors of road transport and shipping, the challenges are creating supporting infrastructure like fuelling facilities and engine modifications. Engines may require small or substantial modifications depending on technology (direct hydrogen burning or fuel-cell based),” he says.However, the good news is that the NGHM push has lowered the cost of green hydrogen.From $5-6 per kg before the mission was launched in 2023, the cost of production has fallen to $3.5-5 per kg (without subsidy) and $3-3.75 (with subsidy) in recent tenders. Even at this level, the cost is far higher than the baseline price of $1.9-2.5 per kg for grey hydrogen, according to CRF data.Besides, the current manufacturing capacity is too low to support a meaningful transition.According to GH2 India, the operational capacity for electrolysers is 65-70 MW—against the announced capacity of 25 GW and incentivised capacity of 3 GW. For green hydrogen, it is 12,000 tonnes—against the announced capacity of 11.2 MT and incentivised capacity of 862,000 tonnes.Though such capacities have been created, actual production has not begun. L&T’s electrolyser plant mentioned earlier hasn’t begun production despite receiving a supply order of 100 MW from Indian Oil’s Panipat plant. Balashanmugam says the entire SIGHT incentive of Rs 17,490 crore is unclaimed. This subsidy is payable after production as is the case with production-linked incentive schemes.Unless the demand crisis is addressed, the supply-side push will end up in stranded assets, erosion in investor confidence, and failure to export.-DEBASMIT PALIT,Energy expert, Chintan Research FoundationExports constraintsIn its “demand creation” segment, the NGHM gives greater emphasis to export markets than domestic demand. It says global demand for green hydrogen and its derivatives is expected to be over 100 MT by 2030 and India is “aiming at” capturing about 10% of it (or 10 MT).But the global market has a more complicated story to tell.In July and August 2026, media reports said that investors were cutting back on investment and capacity creation plans for both electrolysers and green hydrogen production. In 2025, media reported that investors were scaling back and scrapping projects across Europe, the US, Australia, and Japan due to high costs, weak demand, and other factors.With domestic demand yet to take off, India is looking to export green hydrogen. But exporting has its own challenges. Energy expert Gopal Sarangi of the TERI School of Advanced Studies points to three stringent conditions the EU has put for importing green hydrogen, which are also valid for its domestic producers: “new” renewable energy (electricity) generation, hourly matching of production and consumption, and geographic correlation between the renewable energy source powering the electrolyser and hydrogen production. Unless India aligns with the EU regulatory requirements for green hydrogen, it would be hard to export to regions like Europe. -GOPAL SARANGI,Associate Professor, TERI School of Advanced StudiesIn contrast, India’s 2025 certification scheme defines green hydrogen only in terms of carbon emissions—not more than 2 kg carbon dioxide equivalent per kg of hydrogen.“Unless India aligns with the EU regulatory requirements for green hydrogen or develops some strategic approach, such as a coalition of like-minded countries in developing a common green hydrogen taxonomy and regulatory framework, it would be hard to export to regions like Europe,” says Sarangi.An IEEFA-JMK research report in September pointed out that solar PV plants are operating at 35-40% capacity—well below the 50-65% level required for sustainable operations.India’s solar PV experience shows the risks of building manufacturing capacity faster than demand and the supporting supply chain can keep pace. The green-hydrogen push may therefore require a different sequencing, with demand creation keeping pace with manufacturing capacity.

How India’s green hydrogen mission has left investors cautious

India's green hydrogen mission has built some capacity without creating enough demand, leaving subsidies unclaimed, projects stalled, and investors cautious due to high costs and weak export prospects.