Assocham Calls For Hydrogen DRI Support, Green Finance to Decarbonise Steel Sector

Industry body Assocham has submitted pre-budget recommendations to the government, urging targeted incentives for the steel sector to accelerate its transition toward low-carbon and sustainable production ahead of the Union Budget for Financial Year 2026-27. The chamber has called for specific support measures, including incentives for hydrogen-based direct reduced iron (DRI) production, concessional green finance, and fiscal benefits for waste-heat recovery systems and renewable captive power plants. These steps, Assocham argues, would help address decarbonization challenges while positioning India as a competitive global player in green steel manufacturing.

The recommendations come at a time when India remains the world's second-largest steel producer after China, recording consistent annual growth of 8-9 percent. However, the sector continues to face structural constraints, including elevated input costs for key raw materials, a depreciating rupee, and heavy dependence on imported coking coal due to limited domestic mineable reserves. Assocham highlighted that iron ore production has remained stagnant, with many auctioned mines yet to commence operations, while growing domestic steel demand and ongoing iron ore exports continue to exert pressure on supply, driving up costs for Indian mills.

To strengthen domestic capabilities and reduce import reliance, the chamber has proposed incentives for scrap collection and recycling, along with investments in skilling programs to build robust recycling infrastructure. It also advocated for promoting iron ore beneficiation, removing import duties on critical raw materials, and rationalizing royalty calculations to eliminate instances of double taxation. Additionally, Assocham emphasized the need to incentivize research and development in steel recycling, alloy innovation, and process digitization to enhance productivity and cut dependence on imported specialty steel.

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Finance Minister Nirmala Sitharaman is expected to present the Union Budget 2026-27 in Parliament on February 1, 2026. Assocham views the upcoming budget as a critical opportunity to bolster the steel industry under the 'Make in India' initiative, enabling India to emerge as a global manufacturing hub for both primary steel and value-added products. The chamber stressed that targeted policy support would not only help overcome current headwinds but also create long-term competitive advantages in the shift toward sustainable and green steel production.

The steel sector's push for green incentives aligns with India's broader climate commitments and net-zero goals. As discussions intensify in the run-up to the budget, industry expectations remain focused on measures that balance fiscal support with environmental responsibility, ensuring the sector's continued growth while addressing its structural and sustainability challenges.

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