New Delhi: India’s move towards low-carbon green steel is expected to be a gradual, long-term process as cost and technology constraints continue to hinder rapid decarbonisation, rating agency ICRA said on Tuesday. According to ICRA, Indian steelmakers’ carbon emission intensity averages about 2.5 tonnes of CO₂ per tonne of steel (scope 1 and 2), around 12 percent higher than the global average for the blast furnace–basic oxygen furnace (BF-BOF) route.
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While the government’s Green Steel Taxonomy, introduced in December 2024 under the National Mission on Green Steel, sets graded emission thresholds, most domestic primary producers are currently “well above even the upper end of this green range,” highlighting a large decarbonisation gap.
ICRA said planned capacity additions of about 80–85 million tonnes by 2030-31 are expected to be largely coal-based. “The planned capacity additions… are heavily skewed towards the coal-based BF-BOF route, the share of which will increase from ~45 percent currently to roughly 51 percent by 2030-31, reflecting a high carbon intensity in the medium term,” said Girishkumar Kadam, Senior Vice-President and Group Head, Corporate Sector Ratings, ICRA.
As a result, the agency said near-term decarbonisation will depend mainly on operational efficiency improvements and higher renewable energy adoption.
ICRA expects these measures to result in a roughly 19 percent reduction in emission intensity by 2029-30, bringing the sector’s average down to about 2.0 tonnes of CO₂ per tonne of steel by the end of the decade. “A major part of this reduction is expected from renewable energy integration and process optimisations,” Kadam said.
The agency noted that around 9 GW of captive renewable power capacity has already been announced by domestic steelmakers to replace fossil fuel-based electricity. Shifting to green power alone could cut emissions by about 13 percent for BF-BOF-based mills and up to 22 percent for direct reduced iron (DRI)-based units.
ICRA said additional operational levers — such as higher scrap usage, waste-heat recovery and iron ore beneficiation — could further lower emissions. However, the expansion of scrap-based electric arc furnace (EAF) capacity remains constrained by limited scrap availability in India.
The agency also flagged green hydrogen costs as a major barrier to scaling up hydrogen-based DRI steelmaking. ICRA estimates that the break-even cost for the DRI–EAF route would require green hydrogen prices to fall to around USD 1.5–1.6 per kg, compared with current estimates of over USD 3 per kg.
“This is unlikely to be achieved in the near to medium term,” the agency said, adding that large-scale green steel capacity additions will therefore remain limited over this period.
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Over the longer term beyond 2030, ICRA expects demand for green steel in India to pick up, driven by tighter ESG norms, decarbonisation efforts by large end-user industries such as automotive and infrastructure, and supportive policy measures.
While India’s green steel ambitions are aligned with global trends, ICRA said their realisation remains a long-term aspiration, with economics, technology readiness and policy support determining the pace and scale of adoption.
