India Studies Tariff Cuts Under Efforts to Spur Green Hydrogen

(Bloomberg) -- India is considering cuts to tariffs on imports of machinery needed to manufacture green hydrogen, as the nation pushes to become a major hub for the cleaner fuel. 

Prime Minister Narendra Modi’s government is discussing a plan to exempt some equipment from import levies and to reduce goods and services tax on the fuel, which is currently set at 12%, according to people familiar with the details, who requested anonymity to discuss private deliberations. 

The changes would cover both green hydrogen and green ammonia, though would only apply to production of fuel which is then exported rather than sold domestically, the people said. Green hydrogen is produced by using renewable energy to split the hydrogen and oxygen atoms in water.

India’s finance ministry and ministry of new and renewable energy didn’t immediately respond to requests for comment.

India aims to lift green hydrogen production to 5 million tons by 2030 from almost zero currently under a strategy to decarbonize local heavy industries — including refineries and steel mills — and to become a major supplier of the fuel to global markets.

Proposed investments in production in India total about $187 billion and most export agreements struck so far are for shipments to Europe and Japan, BloombergNEF said Friday in a report. Green hydrogen has been endorsed by billionaires including Gautam Adani and Mukesh Ambani, both of whom have announced plans to enter the sector.

However, the industry still faces major challenges in scaling up technology, bringing down costs and building demand. 

In a further effort to spur development, the finance ministry is also considering including green hydrogen among infrastructure sectors able to access funding on easier terms, according to one of the people and a briefing document on discussions seen by Bloomberg News. 

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