CII Advocates Green Hydrogen Mandates and Incentives to Accelerate India’s Clean Energy Transition

Introduction

As an important pre-Budget 2026 policy initiative, the Confederation of Indian Industry (CII) has officially recommended the Government of India to implement explicit green hydrogen mandates with specific incentives to generate demand to lower carbon emissions and transition India to a low-carbon industrial economy. The advocacy is well-timed as the clean energy capacity in India has already reached new heights, yet the use of green hydrogen still has cost and demand difficulties.

The decarbonisation of hard-to-abate sectors including refining, fertiliser production, steel and heavy industry widely is considered to be a strategic clean fuel solution, which is green hydrogen (hydrogen produced via electrolysis driven by renewable energy). Although the country has good production incentive plans with the National Green Hydrogen Mission and associated programmes, demand creation has been a consistent obstacle since green hydrogen is significantly more costly than the conventional so-called grey hydrogen of fossil fuels.

Explanation & Analysis

CII’s Core Recommendations-

The proposal of CII is a multi-pronged approach to allow mass uptake of green hydrogen by breaking policy uncertainty and economic viability:

1. Mandatory Green Hydrogen Blending Mandate: CII agrees to introduce staged requirements of mixing or utilizing green hydrogen in major industries like refining, fertilisers and natural gas infrastructure. Such a regulatory requirement together with incentives would provide predictable demand indications to the producers and result in cost savings based on economies of scale.

2. Mechanisms and Incentives in Cost-Offsetting: Suggestions made by CII to narrow the price gap on grey hydrogen include:

• Verifiable emission reductions under the carbon credit allocation which is a dovetail to future carbon market mechanisms in India, which seek to exchange carbon credit through schemes initiated under the Energy Conservation (Amendment) Bill.
• Cross-subsidy agreements, i.e. cheaper natural gas to fertiliser units in case of mixing with green hydrogen.
• Viability Gap Funding to partially counter the incremental cost incurred by the industry or the consumer.

3. Diversification through Public Procurement as a demand creation: CII addressed the importance of public procurement requirement in anchoring demand. According to its plan, a certain percentage (1015 percent is recommended) of infrastructure materials, such as steel, ammonia, cement utilized in government projects, might be required to be produced in green hydrogen plants. With this kind of offtake guarantees, the risks of investments would be less and the costs will decrease in the long run.

4. Green Hydrogen Clusters (Industrial): To facilitate aggregate demand among smaller firms and lower the costs involved in infrastructures, CII suggested that industrial green hydrogen clusters be built where infrastructure and logistical facilities are shared. Such clusters would be of great benefit to MSMEs that are economically not viable in green hydrogen at the present.

5. Export Promotion Sanctions and Internationalization: CII realised the potential of India as an exporter and thus promoted bilateral deals with the developed hydrogen importers like Germany, Japan and South Korea. It also proposed alignment of Indian certification criteria with international frameworks and have the green hydrogen products be assigned a deemed export category so they can be subject to any existing export incentive scheme.

6. Financial Privately Invested Instruments: To encourage the inflow of the private funds to the hydrogen projects in the early stages, CII highlighted the necessity of innovative financial tools and fiscal incentives to help Indian projects to be competitive in the global market, thereby triggering the use of technology and its global expansion.

Policy and Legal Implications

• The recommendation of CII has serious implications on the energy policy, regulatory regimes, and law tools:
• Regulatory Certainty & Mandates: Mandates on green hydrogen use should have clear legal definitions, a transition to compliance, and an enforcement system, which could be through new policies that are specific to hydrogen, or through modifications to existing renewable energy regulations.
• Carbon Markets Integration: Suggestions to place carbon credits on the introduction of green hydrogen can be synergised with the new carbon trading programs developing in India, which would facilitate the decarbonisation agenda, and offer economic incentives.
• Public Procurement Rules: To ensure that this is done, it might require a change in the current procurement rules and transparency standards to make sure that they comply with the rules and are able to tender fairly and account properly the environmental characteristics.
• Export Frameworks: The coordination between trade, industrial and environmental regulatory regimes will be necessary to grant the status of so-called deemed export and harmonise the standards.

Conclusion

The future-oriented advocacy of CII is an important landmark in the clean energy path of India. Even though the current policy attention has centred on supply-side incentives to make green hydrogen, the industry players are currently calling on a demand-side policy revolution, which will lead to the creation of an active commercial ecosystem. Requirement with specific incentives would trigger a mass conversion, reduce costs by scaling industry, and assist India in exploiting the domestic decarbonisation as well as worldwide clean energy markets.

Following a finalization of Budget 2026 with related regulation frameworks, energy law practitioners, policymakers and industry participants should be keen in tracking the incorporation of these recommendations in legal instruments that will build the clean hydrogen economy in India within the next ten years.