Impact of the new green hydrogen pilot project guidelines on India’s transport sector

India is the world's third-largest energy-consuming country, although its per capita energy consumption is only a third of the global average. In 2023, its energy-related emissions stood at ~2.8 billion tons of CO2, primarily due to a fossil fuel-dominated energy mix. After power and industries, the transport sector is India's third-largest carbon emitter (12–13 percent),4 making it an important pillar for the energy transition. However, the country’s high dependence on oil to meet this demand is a major roadblock to achieving its decarbonisation aspirations. The transport sector accounts for 40–50 percent of India’s overall oil demand.
With increasing demand, disposable income and industrial and commercial activity, India is expected to witness a rapid rise in passenger and freight transport demand. Therefore, decarbonising transport through low-carbon technologies is a critical imperative for the sector.

Hydrogen can play a key role in decarbonising the transport sector

Hydrogen is widely recognised as a clean fuel if produced through electrolysis using renewable energy. Hydrogen-based technologies, such as Fuel Cell Electric Vehicles (FCEV) or Hydrogen Internal Combustion Engines (H2-ICE), could become important decarbonisation levers. These technologies can be most disruptive for long-distance transportation, especially heavy-duty trucking, even without any carbon costs imposed. This may explain the increasing interest in FCEVs in developed countries, such as China, South Korea and Japan.

In India, due to its heavy reliance on oil and high taxes on hydrocarbon fuels, the viability could be higher. However, higher capex, inadequate production scale and lack of supporting infrastructure could be bottlenecks in the initial years. While Battery Electric Vehicle (BEV), the other low-carbon technology, has an efficiency advantage over hydrogen technologies, FCEVs or H2-ICE may still find uptake in long-distance trucking in India if the refuelling infrastructure is developed, primarily driven by shorter refuelling time and higher payload capacity. In addition, the emissions reduction potential is higher for FCEVs as BEVs cannot decarbonise transport unless the grid is green.

The scheme for pilot projects could kick-start hydrogen technologies in the transport sector

Recognising the need, the Ministry of New & Renewable Energy (MNRE) issued the “Scheme Guidelines for Implementation of Pilot Projects for Use of Green Hydrogen in the Transport Sector” in February 2024 under the National Green Hydrogen Mission (NGHM). Under this scheme, pilot projects will be implemented through the Ministry of Road Transport and Highways (MoRTH) and the nominated Scheme Implementing Agencies (SIAs).

The scheme’s total budgetary outlay is INR496 crore until the financial year 2025–26. It aims to support the adoption of hydrogen technology in buses, trucks and four-wheelers based on FCEV and H2-ICE technologies and the development of refuelling infrastructure.

Implementation of the scheme could help India establish a hydrogen economy for the transport sector in several ways. It will kick-start the development of refuelling infrastructure and the associated ecosystem with the help of budgetary allocation. The pilot projects will provide a preliminary assessment of the techno-commercial feasibility of new technologies and subsequent scale-up opportunities. This will help provide appropriate price signals to the investor community as well as OEMs and identify critical focus areas, such as efficiency, safety issues and challenges related to hydrogen storage and transportation.

This scheme is the first step towards the evolution towards using hydrogen in Indian mobility. This, along with other incentive schemes under the NGHM, is expected to generate a favourable climate for hydrogen projects in the transport sector. While India’s prospect in hydrogen-based mobility looks positive, the future focus should be around debottlenecking the infrastructure challenges, suitable viability gap funding in the initial years and the development of an ecosystem. Collaboration between the government, energy companies, think-tanks and OEMs is critical to establishing the hydrogen mobility ecosystem.