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India's planned steel capacity expansion could lock in $1.2 trillion of coking coal imports over 40 years.
This could lead to 19.5 gigatonnes of CO2 emissions.
Green hydrogen-based steel offers more resilient, low-carbon path.
India’s planned expansion of steelmaking capacity could lock the country into nearly $1.2 trillion in coking coal imports and 19.5 gigatonnes of carbon dioxide emissions over the next 40 years, even as green steel production becomes cost competitive by 2030, according to a new report.
India, the world’s second largest crude steel producer with 149 million tonnes of output in 2024, plans to expand installed steelmaking capacity to 300 million tonnes by 2030-31 from around 200 million tonnes in 2025. according to the report Economic Case for Green Steel Production in India.
Around 60-65 per cent of the proposed capacity is expected to use the conventional blast furnace basic oxygen furnace route dependent on imported coking coal, showed the analysis by the India Energy and Climate Center (IECC) at the University of California, Berkeley.
The researchers found that over 90 per cent of India’s coking coal demand is currently met through imports and projected demand could reach 161 million tonnes annually by 2030-31.
“India is at a strategic decision point in steel,” said Neelima Jain, director for Industrial and Trade Policy at IECC. “If future capacity is built around imported coking coal, the country would hardwire currency and price volatility risks into one of its most important industrial sectors. Green steel offers an alternative path.”
The report estimated that green hydrogen can be produced in India at $3 per kilogramme by 2030, enabling hydrogen-based direct reduced iron electric arc furnace steelmaking at $562 per tonne, only around 5 per cent higher than conventional steel from new blast furnace plants, estimated at $536 per tonne.
It further projected that targeted reductions in electrolyser costs and efficiency improvements could lower hydrogen prices to $2.5 per kilogram and reduce green steel costs to below $500 per tonne by 2035.
According to the study, once currency depreciation and coal price inflation are factored in, green steel becomes cheaper than conventional blast furnace steel for plants commissioned around 2030. The report noted that the rupee has depreciated against the dollar by an average 3.2 per cent annually over the past two decades, while seaborne coking coal prices have risen 4.2 per cent annually in nominal dollar terms, resulting in a combined 7.4 per cent annual escalation in rupee denominated coal costs.
“A static cost comparison misses the central economic point,” said Jose Dominguez, research manager at IECC. “Conventional steel depends on imported coking coal priced in dollars. Green steel can be powered by domestic renewable electricity under long-term rupee contracts. Over time, that makes it far more resilient.”
The report highlighted that the European Union’s Carbon Border Adjustment Mechanism, which entered its compliance phase on January 1, 2026, could further weaken the competitiveness of carbon intensive Indian steel exports. The EU currently accounts for around $5.5 billion or 27 per cent of India’s iron and steel exports annually.
The study estimated that a carbon tariff of $ 85 per tonne of carbon dioxide equivalent could make Indian and Chinese blast furnace steel roughly 15 per cent more expensive than green steel produced within Europe. At the same time, Indian green steel produced through hydrogen based direct reduced iron technology could emerge as the cheapest option globally at around $582 per tonne delivered to the EU market.
The report also said India’s high quality solar resources and relatively low cost renewable electricity strengthen the economics of green hydrogen production. It estimated that reliable round the clock renewable electricity for hydrogen production could already be delivered in India at below $60 per megawatt hour using solar plus storage systems.
“India’s experience scaling renewable energy and energy storage shows that well-designed public policy can accelerate cost reduction, unlock private investment, and speed early deployment,” said Amol Phadke, faculty director of IECC. “Green steel will require a similarly deliberate market-creation effort.”
The report called for public procurement, long term offtake agreements, standardised contracts, first of a kind risk cover and alignment with the National Green Hydrogen Mission to accelerate deployment of green steel production in India.
“India’s green hydrogen costs are among the lowest globally,” said Nikit Abhyankar, co-faculty director of IECC. “India could be one of the few countries where green steel becomes economically viable within this decade, giving domestic producers an edge in export markets. It could also strengthen competitiveness in downstream manufacturing sectors such as automobiles and machinery.”