Public Procurement of Green Steel: Market Creation for Sustainable Industrial Growth
The concept of public procurement for green steel embodies the strategic tension between industrial decarbonisation and cost competitiveness. India's proposal to mandate that 25% of public steel purchases be low-emission green steel aims to create market demand while aligning with its commitments under the Paris Agreement and Nationally Determined Contributions (NDCs). The policy is poised to address the dual objective of climate responsibility and sustainable industrial growth in one of the most carbon-intensive sectors.
UPSC Relevance Snapshot
- GS Paper III: Environment (Climate Change Mitigation, Sustainable Manufacturing), Economy (Industrial Policy, Infrastructure).
- GS Paper II: Policy Making (Regulation, Procurement Norms).
- Essay: Role of Industrial Decarbonisation in Achieving Climate Goals.
Institutional Framework for Green Steel Promotion
The institutional support for green steel is rooted in India's climate governance system, industrial decarbonisation roadmap, and incentivization mechanisms for public procurement. Key public institutions, legal provisions, and funding mechanisms define the sector's trajectory.
- Key Institutions:
- Ministry of Steel: Released "Greening the Steel Sector in India: Roadmap and Action Plan."
- Ministry of Road Transport & Highways: Facilitates scrap availability through vehicle scrapping policies.
- Ministry of New and Renewable Energy: Supports renewable energy integration via the National Solar Mission.
- Legal and Policy Provisions:
- Steel Scrap Recycling Policy, 2019: Reduces emissions by enhancing scrap-based steel production.
- Perform, Achieve and Trade (PAT) scheme: Energy efficiency incentivization for steel plants.
- Proposed Public Procurement Mandates: 25% green steel procurement by government bodies.
- Funding Mechanisms: Blended finance models incorporating private investments and climate funds like Green Climate Fund (GCF).
Key Issues and Challenges
The green steel sector faces multifaceted challenges. These are categorized into technological, economic, regulatory, and logistical dimensions:
Technological Constraints
- Limited commercialization of hydrogen-based direct reduced iron (DRI) technologies.
- Massive renewable energy linkage required for green hydrogen production.
- Inevitable energy storage issues linked to renewables used in green steel processes.
Economic Viability
- Higher production costs for green steel compared to conventional methods—current estimates suggest a 20-30% cost premium.
- Lack of economies of scale due to nascent demand; CAG audits could highlight underutilization risks.
Regulatory and Policy Gaps
- Absence of a clear timeline for mandatory adoption of public green steel procurement.
- Weak demand-side incentives for private sectors to join the shift.
Logistical Barriers
- Low recycling rates despite the Steel Scrap Recycling Policy due to inadequate infrastructure.
- Challenges in scaling storage and transport infrastructure for green hydrogen.
India's Steel Transition vs Global Trends
| Parameter | India | Europe |
|---|---|---|
| Production Technology | Hydrogen DRI, Scrap Recycling | Hydrogen DRI, Carbon Capture |
| Public Procurement Standards | Proposed 25% Mandate | Mandatory green steel allocation via EU taxonomy. |
| Emission Reduction Targets | 30% by 2030 (Roadmap) | 50% by 2030 (EU Green Deal) |
| Cost Competitiveness | 20-30% premium for green steel | Increased subsidy coverage via innovation fund. |
Critical Evaluation
While India's green steel procurement initiative aligns with its NDC commitments for industrial decarbonisation, its success depends on overcoming important limitations. First, the absence of commercially viable technologies makes economic viability challenging, particularly in reducing the cost gap. Second, demand-side constraints, such as weak incentives for the private sector, constrain market expansion despite public procurement. Finally, systemic barriers like storage and logistical capabilities for hydrogen require significant capital investment—but risks undermining the policy's efficiency without cross-sectoral integration.
Structured Assessment
- Policy Design Adequacy: The proposed procurement mandate partially addresses demand creation but lacks clarity on enforcement and timeline.
- Governance Capacity: Coordination between energy, transport, and steel ministries is essential for successful cross-sectoral integration.
- Behavioural and Structural Factors: Stakeholder resistance due to high costs and infrastructural inefficiencies highlights gaps in implementation readiness.
Practice Questions
- Consider the following statements regarding green steel production:
- 1. It primarily uses coal-based blast furnaces to reduce carbon emissions.
- 2. Hydrogen-based DRI and electric arc furnaces are key technologies used.
- A. 1 only
- B. 2 only
- C. Both 1 and 2
- D. Neither 1 nor 2
- Which of the following policies directly supports the decarbonisation of India's steel industry?
- 1. Steel Scrap Recycling Policy
- 2. National Solar Mission
- 3. Green Climate Fund
- A. 1 only
- B. 1 and 2 only
- C. 1, 2, and 3
- D. None
Practice Questions for UPSC
Prelims Practice Questions
- 1. It primarily uses coal-based blast furnaces to reduce carbon emissions.
- 2. Hydrogen-based DRI and electric arc furnaces are key technologies used.
Which of the statements is/are correct?
- 1. Steel Scrap Recycling Policy, 2019
- 2. National Solar Mission
- 3. Perform, Achieve and Trade (PAT) scheme
Which of the above statements is/are correct?
Frequently Asked Questions
What is the significance of India mandating 25% public procurement of green steel?
India's mandate for 25% public procurement of green steel aims to create market demand for low-emission steel while supporting its commitments under the Paris Agreement. This initiative addresses the dual objectives of industrial decarbonisation and sustainable growth in one of the most carbon-intensive sectors, aligning both economic and environmental goals.
What are the primary technological challenges facing the green steel sector in India?
The green steel sector in India faces several technological challenges, including the limited commercialization of innovative hydrogen-based direct reduced iron (DRI) technologies and significant renewable energy requirements for green hydrogen production. Additionally, there are challenges related to energy storage linked to renewables, which complicate the transition to low-emission steel production.
How does the economic viability of green steel compare to conventional steel production?
The economic viability of green steel is currently weaker than traditional steel production methods, with a reported cost premium of 20-30%. This high cost results from the nascent demand for green steel, which prevents economies of scale, and has led to concerns over the potential underutilization of resources as highlighted by CAG audits.
What roles do various Indian ministries play in promoting the green steel initiative?
Multiple ministries are involved in promoting green steel in India. The Ministry of Steel released a strategic roadmap; the Ministry of Road Transport & Highways facilitates scrap availability through vehicle scrapping policies, and the Ministry of New and Renewable Energy supports renewable integration via initiatives like the National Solar Mission.
What are some formational frameworks and mechanisms underpinning the green steel initiative?
The promotion of green steel in India is backed by an institutional framework that includes a variety of policies such as the Steel Scrap Recycling Policy, the Perform, Achieve and Trade (PAT) scheme, and blended finance models. These mechanisms are designed to incentivize public procurement while fostering collaboration between public and private sectors.
Source: LearnPro Editorial | Environmental Ecology | Published: 26 July 2025 | Last updated: 3 March 2026
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