Industrial growth is often inimical to climate responsibility. Steel is fundamental to India’s manufacturing, but is also one of the most carbon-intensive industries. India’s steel sector is the second largest in the world with annual production of 120 million tonnes (MT), but accounts 7–9% of global CO₂ emissions. In view of India’s global commitment to attain net-zero emission by 2070, decarbonisation of steel is an urgent imperative.
It is estimated that advanced technologies for greening of steel production like green hydrogen-based direct reduced iron (H₂-DRI), electric arc furnaces (EAFs) powered by renewable energy, carbon capture for legacy assets, and increased scrap utilisation can reduce the emission by 95–97% by 2050, but adoption of these technologies remain low because of prohibitive costs.
Green steel today costs 20–40% more than conventional blast furnace–basic oxygen furnace (BF-BOF) steel. The current policy approach has been to bridge this gap through subsidies, not direct but trough PLI, capital grants, or viability gap funding. But subsidies lock in inefficiencies, discourage innovation and delay technology adoption, besides creating unsustainable fiscal strain.
But the government has a more potent weapon at its disposal – through strategic procurement, not only at lower rate, but by nudge markets towards favouring green technologies. The total public sector procurement covering infrastructure, railways, roads, ports, defence, housing, etc. amount to about 30% of India’s GDP, and steel is embedded across all these sectors. This gives the government enormous leverage to transform markets – but government procurement has so far remained carbon-neutral focusing only on the minimisation of costs. This neutrality is no longer benign, because it reinforces the existing cost structure and discourages greening of steel. Mandating green steel specifications in tender documents issued by government departments would instantly create a large, predictable, and creditworthy demand base—something private markets can never do.
Recognising this, the ministry of steel’s has prepared a roadmap for decarbonising the steel industry and creating demand for low-emission steel, with green public procurement (GPP) as a central pillar of the policy. It envisages the share of GPP rising 5% to 15%, or, from 2.2 MT in FY27 to 10.6 MT by FY31, thus cumulatively creating demand for 27 MT of steel over this period. This could reduce costs by 15-20% within three years, narrowing the price gap between green and conventional steel prices and boosting market confidence for transition towards greening of steel production.
{{/usCountry}}Recognising this, the ministry of steel’s has prepared a roadmap for decarbonising the steel industry and creating demand for low-emission steel, with green public procurement (GPP) as a central pillar of the policy. It envisages the share of GPP rising 5% to 15%, or, from 2.2 MT in FY27 to 10.6 MT by FY31, thus cumulatively creating demand for 27 MT of steel over this period. This could reduce costs by 15-20% within three years, narrowing the price gap between green and conventional steel prices and boosting market confidence for transition towards greening of steel production.
{{/usCountry}}India already has a template for leveraging the transformative power of demand aggregation through its climate friendly UJALA LED bulb programme. At launch in 2015, the unit cost of LED bulbs ranged between ₹300–350, limiting adoption of their energy-saving potential. Instead of subsidising their manufacture indefinitely, the government used its already existing energy service company—the Energy Efficiency Services Limited (EESL)—to aggregate demand across states and public utilities and issued large-scale tenders.
The results were dramatic – within just 3 years, 770 million LED bulbs replaced earlier energy-guzzling electric bulbs, their prices fell by almost 90%, to under ₹40 per unit, annual sales exceeded 360 million units, and consumers saved ₹19,000 crore annually in electricity bills without any subsidy. The annual reduction in CO2 emission amounted to 47 MT, with India becoming the world's second-largest LED producer. This transformation came just from demand aggregation and clear competitive tendering allowing manufacturers to scale production, reduce costs, and innovate —and the principles can work for green steel. Germany's green steel procurement efforts have achieved similar 15-20% price reductions through demand aggregation. The method is proven; what remains is systematic implementation.
Presently, the cost premium of green steel depends on three factors: the high cost of green hydrogen, limited scale of production, and lack of long-term offtake guarantees. Decline in green hydrogen (GH) price is crucial, to make green steel cost-competitive vis-à-vis conventional steel, GH price must come down from the current $4-6/kg to $1-2/kg. Strategic government procurement can directly address this. We just need 15–20% of India’s annual steel demand—about 20–25 MT—to be committed through GPP across government projects to create the world’s largest assured market for low-emission steel which will automatically build the ecosystem for speeding up manufacturing investments, lowering risks and costs, and encouraging innovation and technological sophistication.
The ministry's roadmap acknowledges this dynamic by forecasting continued GPP growth through 2031—creating the demand certainty that manufacturers need to invest in green capacity. The fiscal cost of inaction would be much higher, as India's annual steel exports worth around ₹1 lakh crore ($12 billion) would be threatened by EU’s Carbon Border Adjustment Mechanism and similar tariffs without this transition. Traditional blast furnace capacity risks becoming stranded assets as global markets evolve. With India’s projected production of 300 MT by 2030, delayed decarbonisation risks pushing India out of emerging markets.
Translating the ministry's roadmap into action requires mandating green steel specifications in all central government procurements and modifying procurements norms and tender documents to force contractors to buy low emission steel, since most steel for government projects is purchased indirectly through contractors. Through the Green Steel Taxonomy and Roadmap, released in 2023–24, the ministry has already outlined emission thresholds, certification principles, and phased decarbonisation pathways. But without binding procurement mandates, the roadmap may remain on paper only.
Indian Railways alone consumes over 6 MT of steel annually; other major users are NHAI, ministries of housing, power, ports, shipping, defence and CPWD. A mandate by Depatment of Expenditure requiring sourcing of certified green steel by all their contractors and demonstrating compliance thereof through NISST (National Initiative for Sustainable Steel) certificates would ensure compliance without creating additional administrative structures.
Green steel must also employ internationally recognised emissions intensity benchmarks to be certified by an independent agency like the CAG of India. To ensure transparency, a National Green Steel Dashboard should be developed like the UJALA's model, which would display monthly data on procurement volume, price trends, emissions avoided, star-rating distribution, and tender competitiveness.
The steel sector is vital to India’s commitment in reducing emission by 45% for every rupee of GDP in 2030, compared to 2005. Globally, green steel is fast becoming a geopolitical and economic asset. The EU, Japan, and South Korea are embedding green material standards into public infrastructure.
It is no longer a question of choice. The roadmap and technology are already there, and demand also exists within the government itself, as do the institutions like the EESL, CAG, and the line ministries. All that is required is the political resolve to operationalise the roadmap through dedicated institutional structures. India's journey to net-zero passes through its steel mills. The tools are ready. The time to use them is now.
This article is authored by Govind Bhattacharjee, former director general, CAG and currently professor, AJNIFM and Mihir Bhonsale, policy analyst, New Delhi.