Govt to waive off import duty on electrolysers to give initial push to green hydrogen: RK Singh

Power Minister RK Singh (Source: Twitter/@OfficeOfRKSingh)

A day after the Union Cabinet cleared the much awaited National Green Hydrogen Mission, Union Power and Renewable Energy Minister RK Singh said that other than the incentives being planned, the government is also planning to waive off import duty on electrolysers for a short period, after which heavy duties shall kick in.

Talking to reporters in New Delhi on January 5, Singh said the Rs 17,490 crore-worth of incentives for production of green hydrogen and manufacturing of electrolysers will mostly be a “production linked incentive (PLI)".

“The PLI for electrolyses will cover the manufacturing of 15 GW (15,000 MW) of capacity. But, we expect the overall electrolyser manufacturing capacity to be almost 60 GW in India, which could be the largest in the world. The final details of the PLI scheme will be released soon as it will have to be approved by the Cabinet,” Singh told reporters.

“But apart from the PLIs, we are also planning to not impose any duty on import of electrolysers till a cut-off date, let’s say 2025-26. By 2025-26 we expect the domestic manufacturing capacity of electrolysers to come up and thereafter, heavy import duties will kick in. After the cut-off date we expect stakeholders to use electrolysers made in India,” the minister said.

He added that the PLI for green hydrogen production will be valid “only for the first few years”. “This is because I believe the cost of green hydrogen of India will be competitive in not more than 2-3 years. In fact, it is already competitive due to high international prices of oil and petroleum.”

Nearly Rs 13,000 crore of the Rs 17,490 crore will be given as incentives for the production of green hydrogen and the remaining amount (Rs 4,490 crore) will be for manufacturing of electrolysers. But BS Bhalla, secretary, ministry of new and renewable energy (MNRE) said the funds are flexible, meaning, within the bucket of Rs 17,490 crore the break-up for the two sectors could be changed if the industry demands so.

He said that the mission document on green hydrogen will be released in a week or two.

NO GREEN HYDROGEN CONSUMPTION OBLIGATION AS OF NOW 

Contrary to the MNRE’s previous plans where the government was to impose a green hydrogen purchase obligation (GHPO) on certain sectors which heavily use grey hydrogen such as refineries and fertiliser companies, Singh said the government will instead have a consumption based obligation in the near future. However, no “green hydrogen consumption obligation” has been levied at the moment.

“We are not doing away with the consumption obligation. But, it is just that the trajectory we had earlier planned of 3 percent, 5 percent and 10 percent is no longer relevant. Now we want even more in the first go itself. For example, if the cost of green hydrogen, let’s say, comes to Rs 3 per kg and instead of buying that, you’re importing natural gas to make grey hydrogen at a much higher cost. Why would any company do that?”

Singh explained that the government’s intention is to bring the cost of green hydrogen at par with grey hydrogen or even less so that the hard-to-abate sectors automatically transition to the carbon-free gas.

Bhalla later told Moneycontrol that no mandates have been decided as of now. “But the mission permits a mandate if decided in the future,” he said.

NO MEGA SUBSIDIES 

In the press conference, Singh also hinted that India will not dole out huge subsidies to propel green hydrogen production in the country.

When asked about the challenges he can foresee in executing the mission, the minister said, “The only challenge I face, which our industry faces, is huge subsidies announced by some developed countries on manufacturing green hydrogen. We believe that to be a trade distorting step, which I think is actionable under the World trade Organisation (WTO) rules.”

PILOT PROJECTS

Under the mission, the government of India will fund pilot projects in three sectors - shipping (Rs 115 crore up to 2025-26), long-haul mobility (Rs 496 crore up to 2025-26) and low carbon steel projects (Rs 455 crore up to 2029-30).

Energy storage is also another sector where the government plans to invest on pilot projects in a later stage.

In shipping, Singh said the government is already working on a vessel in Varanasi where it is being remodelled for green hydrogen propulsion.