India’s PLI schemes under the Green Hydrogen ecosystem

India is poised well on its way towards meeting the essential climate goals it has set out for itself at different global fora over the last several years. Recent announcement of the detailed guidelines for the Production Linked Incentive (PLI) schemes for Green Hydrogen production and Electrolyser manufacturing by MNRE, under the flagship SIGHT programme of National Green Hydrogen Mission is one such step.

While India’s national level PLI programme(s) under different sectors like Electronics, Automobiles, Semi-conductors, etc. have already created ripples in the global industry platforms, such continued measures in the Green Hydrogen space will further strengthen India’s image as a resilient and growing juggernaut that is expected to grow leaps and bounds in the coming decades.

The recently released PLI guidelines cover two such critical areas of the Green Hydrogen ecosystem, namely, production of Green Hydrogen and manufacturing of electrolysers in India. A total budgetary outlay of Rs 13,050 crore is earmarked for the former while the latter gets an allocation of Rs 4,440 crore.

Incentives under the Green Hydrogen PLI scheme would be provided for a duration of three years starting from the date of commencement of Green Hydrogen production. Beneficiaries would be selected through a competitive selection process wherein applicants quoting minimum fiscal incentive would be given preference. Further, an upper cap of incentives has also been provided starting from Rs 50/kg in first year of production, thereafter, reducing to Rs 40/kg and Rs 30/kg in following two years. Amongst the extant technologies available for GH production, scheme also carves out specific allocations for Biomass based pathways, thereby showing an all-inclusive framework of reference.

Whereas, incentives under the Electrolyser PLI would be provided for a duration of five years starting from the date of commencement of manufacturing of electrolysers. Incentives would start at Rs 4,400/kW gradually tapering down over a period of five years. Unlike the Green Hydrogen PLI, scheme for electrolysers focuses on two additional critical parameters for computing eligibility for incentives. First, it focuses on Specific Energy Consumption (SEC) parameters of the electrolysers proposed to be manufactured and rewards the high performers, second, it emphasises on the Local Value Addition (LVA) norms and provides for minimum LVA that needs to be necessarily achieved in order to become eligible for incentives. Applicants following an optimal combination of SEC and LVA factors would stand better chances of getting selected under the final set of beneficiaries in the scheme.Given the fact that capex requirements in this sector are significant, the two schemes also allow companies to form consortium or joint ventures for application purposes. Appraising responsibilities under this scheme have been given to Solar Energy Corporation of India (SECI).

The National Green Hydrogen Mission envisages development of at least 5 MMT Green Hydrogen production capacity in the country by 2030 as a result of these strategic interventions. The commensurate increase in renewable energy generation capacity is to the tune of 125 GW by the same time. While one may argue that these are ambitious targets, it is pertinent to note that the growth of renewable energy sector over the last few years has been phenomenal, and it is expected to continue its ascent in an accelerated fashion.

Since the larger chunk of PLI fund is allocated towards Green Hydrogen production, the same warrants adequate attention for analysis. In order to remain competitive during bids, it would be critical to analyse and devise novel methods to increase capex efficiency and operational efficiency. Some of such key measures could include combining various State level fiscal benefits and tax optimization benefits during the initial capex planning phase.

It would also be interesting to see how different Green Hydrogen producers collaborate with their electrolyser suppliers (manufacturers) to gain project level efficiencies.

Introduction of these schemes is expected to give a significant boost to the whole Green Hydrogen ecosystem in India, which is at a very nascent stage presently. If implemented effectively and efficiently, it would go a long way in setting a strong foundation for the clean energy transition of the Indian juggernaut.

[This piece was written by Saurabh Agarwal, Tax Partner, EY India, with contributions from Mohit K Sharma, Senior Manager, EY India]

  • Published On Jun 29, 2023 at 08:31 PM IST

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