Budget 2026: Assocham seeks hydrogen DRI, green finance to decarbonise steel

Ahead of the Union Budget, industry body Assocham has urged the government to roll out targeted incentives to help India’s steel sector transition to low-carbon production, warning that the industry risks losing global competitiveness if decarbonisation is not accelerated.

Finance Minister Nirmala Sitharaman is scheduled to present the Union Budget for FY2026–27 in Parliament on February 1. In its pre-Budget recommendations, Assocham called for fiscal and financial support for hydrogen-based direct reduced iron (DRI) technologies, along with concessional green financing, to enable steelmakers to cut emissions without undermining profitability.

The chamber also proposed incentives for installing waste-heat recovery systems and setting up renewable captive power plants, arguing that energy efficiency and clean power are essential to lowering the sector’s carbon footprint. According to Assocham, decarbonisation should be viewed not just as a regulatory obligation but as a strategic opportunity that can position Indian steel as a preferred choice in global markets increasingly focused on sustainability.
Assocham further highlighted the need to strengthen scrap collection and recycling. It said incentivising the recycling ecosystem and investing in skill development could significantly reduce India’s dependence on imported raw materials while supporting a circular economy.

Despite India being the world’s second-largest steel producer after China and recording a healthy growth rate of 8–9 per cent, the sector faces mounting challenges. Assocham pointed to elevated input costs, a weakening rupee and heavy reliance on imported coking coal—owing to limited domestic mineable reserves—as major constraints on competitiveness.

The industry body also flagged supply-side pressures, noting that iron ore production has remained largely stagnant and several auctioned mines are yet to become operational. At the same time, rising domestic steel demand and continued exports of iron ore are squeezing availability for local producers, pushing up costs for mills.

Assocham said the upcoming Budget presents a crucial opportunity to strengthen India’s position as a global manufacturing hub for steel and value-added products under the ‘Make in India’ initiative. To support this goal, it has called for promoting iron ore beneficiation, removing import duties on critical raw materials and rationalising royalty calculations to avoid instances of double taxation.

The chamber also stressed the importance of boosting research and development in areas such as steel recycling, alloy innovation and process digitisation. These measures, it said, would not only enhance productivity but also reduce India’s dependence on specialty steel imports, making the sector more resilient in a rapidly evolving global market.

(With PTI inputs)