(MENAFN- KNN India) New Delhi, Nov 27 (KNN) India must deploy public capital more strategically to support green steel projects and avoid long-term carbon lock-in as the country expands its steel capacity, according to a new analysis by the Institute for Energy Economics and Financial Analysis (IEEFA).

With 92 per cent of India's planned capacity increase from 180 Mt to 300 Mt yet to be built, IEEFA warns that choosing low-emission technologies now will shape the sector's carbon footprint for decades.

Relying on conventional blast furnace technology would also increase dependence on imported metallurgical coal and pose energy security risks.

The briefing notes that green steel projects globally have relied heavily on public finance, with credit guarantees mobilising more private capital than direct grants.

High upfront investment and long payback periods remain major barriers to private sector funding in emerging green steel technologies.

India's proposed National Mission for Sustainable Steel, with a Rs 5,000 crore outlay, is expected to provide incentives and risk guarantees primarily for secondary steel producers.

A draft Green Public Procurement policy seeks to mandate that a share of steel used in public projects be low-carbon, although earlier attempts at centralised green steel procurement faced hurdles.

The upcoming Carbon Credit Trading Scheme, expected in 2026, may encourage cleaner production, though its impact will depend on carbon pricing levels.

IEEFA also noted that while steelmakers are increasingly issuing green and sustainability-linked bonds, these instruments largely support incremental improvements rather than major technological transitions.

To accelerate India's transition, the report recommends three key interventions: a government-backed credit guarantee facility, product-based Contracts for Difference through reverse auctions, and dedicated project preparation support for MSMEs.

According to IEEFA, India's green steel roadmap will require well-designed public financial tools to attract private investment while ensuring efficient use of taxpayer funds.
(KNN Bureau)

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