India’s transition to low-carbon green steel is expected to remain a gradual, long-term process as cost and technological constraints continue to hinder rapid decarbonisation, according to rating agency ICRA.
According to the analysis, Indian steelmakers’ carbon emission intensity averages about 2.5 tonnes of CO₂ per tonne of steel, roughly 12 per cent higher than the global average for the blast furnace-basic oxygen furnace (BF-BOF) route.
It also notes that the recent introduction of a Green Steel Taxonomy by the government in December 2024 marks a positive step, setting graded emission thresholds to define what qualifies as “green” steel.
However, most Indian primary producers are currently well above even the upper end of this green range, underscoring the significant decarbonisation gap that needs to be bridged.
“The planned capacity additions of about 80–85 million tonnes (mt) in India by 2030-31 are heavily skewed towards the coal-based BF-BOF route, the share of which will increase from around 45 per cent currently to roughly 51 per cent by 2030-31, reflecting a high carbon intensity in the medium term,” said Girishkumar Kadam, Senior Vice-President & Group Head, Corporate Sector Ratings, ICRA.
ICRA’s report highlights that around 9 gigawatts (GW) of captive renewable power capacity has already been announced by domestic steel mills to replace fossil fuel-based electricity in their operations.
Transitioning to green power alone is expected to cut emissions by about 13 per cent for mills based on blast furnace and basic oxygen furnace and by up to 22 per cent for Direct Reduced Iron-based steelmaking units.
Other operational levers – such as higher scrap usage in furnaces, energy efficiency measures like waste-heat recovery, and iron ore beneficiation – are expected to further lower CO2 per tonne.
However, the scrap-based EAF capacity, which has a far lower carbon footprint, remains constrained by limited scrap availability in India.
“Consequently, the domestic steel industry’s near-term decarbonisation will mainly rely on operational efficiency gains and higher renewable energy adoption, which is expected to result in about 19 per cent reduction in emission intensity by 2029-30 and would bring the sector average down to roughly 2.0 tCO2 per tonne by the end of this decade,” said Kadam.
He added that a major part of this reduction is expected from renewable energy integration and process optimisations.
As per its estimates, the break-even cost of production via the DRI–Electric Arc Furnace route would require green hydrogen to fall to about $1.5–1.6 per kg, versus the current estimate of over $3 per kg.
The agency considers it unlikely to be achieved in the near to medium term, which means large-scale green steel capacity addition will remain constrained over the medium term.
Over the long term beyond 2030, green steel demand in India is projected to accelerate and will be driven by tightening ESG compliance norms, large end-user industries striving to decarbonise their supply chains, and policy measures.
