India’s steel industry is in a fragile state. The country is ramping up its manufacturing, its infrastructure, and its cities, and they all need a lot of steel. Coal, however, and particularly imported coking coal, still represents a major component of the traditional production methods that support this expansion. The challenge now is not only to increase steel production but also to do so without locking the economy into decades of carbon-intensive infrastructure and exposure to volatile global commodity markets. The difficulty is huge. India produced about 149 million tons of crude steel in 2024 and aims to reach 300 million tons by 2030-31. A large part of this growth is expected to be based on the traditional blast furnace production. A 2026 estimate by the India Energy and Climate Center at the University of California, Berkeley, says it could expose India to higher import costs for coking coal and carbon emissions over the long term.
Green steel is an alternative, but it will take more than technological innovation to make it a success. It will require an industrial policy that ties together public purchasing, investment in manufacturing, clean energy, security of raw materials, and international trade. The question is whether decarbonisation can be a part of the Indian industrial growth, rather than an expensive overhaul done after more capacity has been built.
Steel is critical to India’s aspirations to build infrastructure for renewable energy, housing, automobiles, railroads, and highways. But for steelmaking, coke made from coking coal is needed to reduce iron ore to create the heat required in the traditional blast furnace-basic oxygen furnace production method. The high capital costs, long service lives, and dependence on well-established supply chains of the facilities make it difficult to replace this industrial system. India’s dependence on imported coking coal makes it even more susceptible. Steel makers are dependent on foreign prices, shipping costs, and exchange rate fluctuations due to a lack of sufficient good-quality coking coal in the country. Hence, growth based largely on traditional manufacturing might lead to an increase in industrial output but also to a greater sensitivity to imported inputs.
Green steel is no longer solely a question of environmental policy but has also become a matter of industrial policy. Routes of production using recyclable scrap, renewable electricity, and, where economically and technically feasible, green hydrogen could reduce emissions while diversifying resources used in the steel-making process. The transition will not be uniform. India's varied steel sector embraces large integrated producers together with smaller secondary steel manufacturers that operate electric arc and induction furnaces. They have very different access to technology, scrap, financing, and reliable power. A policy that assumes all producers can quickly follow the same production route risks leaving smaller manufacturers behind.
{{/usCountry}}Green steel is no longer solely a question of environmental policy but has also become a matter of industrial policy. Routes of production using recyclable scrap, renewable electricity, and, where economically and technically feasible, green hydrogen could reduce emissions while diversifying resources used in the steel-making process. The transition will not be uniform. India's varied steel sector embraces large integrated producers together with smaller secondary steel manufacturers that operate electric arc and induction furnaces. They have very different access to technology, scrap, financing, and reliable power. A policy that assumes all producers can quickly follow the same production route risks leaving smaller manufacturers behind.
{{/usCountry}}One of the biggest barriers to low-emission steel is the cost up front. The production of iron using green hydrogen-based direct reduction combined with electric arc furnace production requires large investments in hydrogen supply, renewable electricity, equipment, and supporting infrastructure. The economic viability of these technologies will be influenced by the cost and reliability of clean power, the efficiency of electrolysers, financing conditions, and the availability of suitable iron ore and other inputs. But if long-term concerns are added, the cost comparison changes. Currency fluctuations and the price of imported coking coal impact conventional steel production. Companies can achieve greater price stability with long-term supply contracts for renewable electricity. Trade policies on carbon may also affect emissions-intensive steel’s competitiveness in export markets.
India has already initiated the process of framing a framework for this change in policy. The ministry of steel announced the Green Steel Taxonomy in December 2024 with a star ranking system and emissions-intensity standards. The methodology provides a basis to identify steel with lower emissions and to improve comparability of environmental performance across producers. The government has also allocated ₹455 crore for green hydrogen pilot projects in the steel industry under the National Green Hydrogen Mission. These projects are for the 2029-2030 fiscal year. Pilot projects alone cannot change an industry of the size of India's, but they can lead to technological learning. The next challenge is turning early demos into money-making investments.
While India's green steel framework can find lower-emission goods, certification doesn't always mean higher demand for them. Manufacturers need to think that consumers will buy their goods at prices that will cover their costs for more environmentally friendly production. One way of addressing this ambiguity is by public procurement. Public buildings, roads, bridges, railroads, and housing are all government-funded infrastructure projects that need huge amounts of steel. There may be an initial market for lower-emission products if some procurement programmes include verifiable emissions-intensity requirements. Such a system would require careful design. Rather than placing obligations on smaller producers that they cannot meet, procurement requirements should begin with pilot projects and increase gradually with the growth of supply. Standard emissions accounting, transparent certification, and periodic evaluations would help to make sure that green labels are based on measurable reductions and not just marketing claims.
The government will also have to consider how the extra costs are shared. Procurement agencies should consider the overall cost of projects and the public benefits of reducing embedded emissions when low-emission steel is more expensive. If there was a strong demand signal, producers would invest in cleaner tech, and the premium would shrink as output rises. This is particularly important as public infrastructure spending will continue to influence India’s steel demand for years ahead. Decisions taken today on standards for building and buying can influence investment in production technologies tomorrow.
India’s industrial policy should take into account changes in trade policy and in the global environment. In January 2026, the European Union’s Carbon Border Adjustment Mechanism reached its final phase, raising the importance of emissions accounting for covered imports (e.g., steel and iron). This makes it all the more imperative for Indian exporters to quantify and record the carbon intensity of manufacturing. The consequences will depend on the product coverage, relevant emission calculations, and the regulations that govern the mechanism. But firms unable consistently to show their emissions performance could find themselves in a more ambiguous position in major export markets. The answer has to be more than protecting exporters from new trade barriers. Better emissions measurement can also help Indian producers to plan investments, pinpoint inefficient processes, and cut energy consumption. A domestic certification system, where appropriate, that is consistent with internationally accepted accounting practices could foster the development of home markets and export competitiveness.
The draft National Steel Policy Vision 2047 is an opportunity to embed these issues in a longer-term industrial strategy. India’s steel capacity is likely to grow significantly, and the policy choices made in this expansion cycle will have ramifications beyond the next decade.
A green steel strategy cannot be restricted to large integrated operations. They face a number of unique challenges, including limited access to inexpensive financing, fragmented scrap supply networks, and difficulties in procuring energy-efficient equipment. If only the large companies benefit from government incentives and technical assistance, the change could exacerbate the existing imbalances in the sector. Policy support should therefore include investment incentives that can be combined with financial access, technical assistance, reliable renewable electricity, and stronger domestic systems for collecting and processing scrap. Its ability to displace iron ore will depend on the availability, quality, and competing uses of scrap. Recycling can help to reduce the need for primary ironmaking.
Social consequences are just as important to think about. Coal mining, coke production, and traditional steelmaking sustain jobs and local economies across many industrial areas. Changes in production technology will impact employment patterns, the skills required for different occupations, and demand for different services. Investment in cleaner steel must be accompanied by worker training, community engagement, and economic diversification strategies, particularly in areas where livelihoods are at risk. Industry is not outside the competitiveness of these measures. They can spread the benefits of new investment more widely than the owners of plants and equipment suppliers, and reduce opposition to technological change.
India has established a foundation for green steel, with a national taxonomy, a decarbonisation roadmap, pilot projects on green hydrogen, and growing awareness of emissions in international trade. The challenge today is to link them to a compelling market and investment plan. In planning future steel capacity, the long-term economic and emissions consequences of alternative production trajectories should be considered before capital-intensive infrastructure is commissioned. Second, the government should use phased procurement requirements and reliable emissions disclosure to increase demand for certified low-emission steel. Thirdly, there is need for financial and technical assistance to secondary producers and to workers and communities affected by industrial restructuring. A rapid surrender of traditional production is not what one should aim for. Given current factories and technology, and the need for reasonably priced steel, an overnight wholesale shift isn't possible. What India needs instead is a credible pathway to accelerate investment in much lower-emitting industries while rewarding incremental reductions in emissions.
Green steel could be a big win for industrial policy in India if it builds manufacturing capacity that is less dependent on imported fossil fuels, more agile in the face of shifting trade rules, and more consistent with its climate obligations. But that outcome is not assured. That depends on how closely the nation adheres to its stated goals on infrastructure spending, energy policy, industrial finance, and procurement. India’s steel sector will shape the country’s economic and emissions trajectories for decades to come. The next generation of steel factories can be not only bigger but also less carbon-intensive and more resilient. The true test of industrial policy will be whether India can make that shift before today’s investment choices become tomorrow’s constraints.
(The views expressed are personal)
This article is authored by Anusreeta Dutta, columnist and climate researcher.